Spot gold continued to hover near $1,935 in Asian trading on Tuesday, while silver also maintained gains as the market awaited Federal Reserve Chairman Colin Powell’s speech at the central bank’s annual meeting in Jackson Hole on Thursday.
Gold prices have started to consolidate after two previous slumps, and the current rally faces several headwinds.
The DOLLAR continues to rally: The dollar has continued to rally recently, rebounding after the Federal Reserve released minutes of its last meeting on Wednesday that sounded more dovish than expected. The minutes prompted dollar bears to buy heavily shorted dollars, pushing them to their biggest one-day gain in more than two months.
The dollar’s sharp weakness against the euro has been put on hold and was boosted on Friday by data showing improving conditions for U.S. companies and European data showing a slowing recovery.
Risk mood rebound: New developments in the global pandemic race have boosted risk sentiment, including FDA approval of novel Coronavirus plasma from novel Coronavirus patients who have recovered from novel coronavirus.
In addition, the US government is considering speeding up approval of trials of coVID-19 vaccines developed by AstraZeneca and Oxford University with a view to using them in the US before the November 3 election.
Meanwhile, there was heavy trade news Tuesday between The U.S. and China. Trade representatives from China and the US spoke by phone yesterday to assess a phase I trade agreement. The Chinese said they had “constructive dialogue” and the US said “we see progress”. Both sides are optimistic about a phase I deal.
Gold ETF days without inflows: Holdings of the SPDR gold ETF have not changed over the past four trading days. The last time SPDR Gold Trust saw ETF investors so inactive was more than two months ago.
Meanwhile, the CFTC’s report on traders’ positions for the week ended Aug. 18 showed fund managers reduced their total speculative long positions in Comex gold futures by 4,402 contracts to 151,016.
Some analysts said the trading figures were the latest evidence that gold had entered an important period of consolidation after an unprecedented rally since the start of the year.
Analysts at Commerzbank said the waning speculative interest in gold could also be seen in demand for gold etfs. All the signs, they added, are that investors are taking a wait-and-see attitude to gold.
On the daily chart, the DOLLAR.DXY was choppy higher after earlier hitting a low of 92.12 and is now trading around 93.15. The daily chart MACD red kinetic energy column expands slightly and the KDJ random index breaks above the 50 level, indicating that further rebound is likely to follow.
On the 4-hour chart, the DOLLAR index has risen above all its moving averages. Watch for a firm 100-day average of 93.12. The MACD red momentum column weakened slightly, while the KDJ random index held steady above the 50 level, indicating a slowdown in bullish U.S. dollar momentum, short term or further consolidation.
On daily charts, bulls were hit by the previous two big negative lines, with gold now trading below its 20-day moving average. The daily chart MACD green momentum column was largely steady, with the KDJ random index trading just below 50, indicating gold bearish momentum remains and a consolidation may follow.
On the 4-hour chart, gold appears to be heading for a falling high, with an eye on whether the previous low of $1,911 will be broken. The MACD green momentum column was very weak, with the KDJ random index falling below the 50 level, indicating weak bearish momentum for gold, short term or further consolidation.
On daily charts, silver is hovering near its 20-day moving average as it tries to regain ground following its August 11 collapse. A small expansion in the green momentum column on the daily MACD chart, with the KDJ random index hovering above the 50 level, indicates that bearish momentum is strengthening in silver or further consolidation.
On the 4-hour chart, silver continues its slide from $28.46 and is hovering near its 100-term average. The MACD green momentum column was very weak, with the KDJ random index trading around the 50 level, indicating less bearish momentum for silver, short term or further volatility.
Fundamentals positive factors:
- On August 24, local time, TikTok formally filed a lawsuit against the FIRST executive order issued by the Trump administration on August 6. TikTok argued that the US government had not given the company a fair chance to defend itself and that President Trump’s executive order did not apply to TikTok and was illegal.
- The Republican National Convention officially nominated Incumbent President Donald Trump as the Republican Presidential nominee for 2020 on The afternoon of April 24 EST. He accused Democrats of “novel Coronavirus to steal our election”. He also warned of widespread fraud in postal ballots.
- The situation between China and the US remains tense. In an interview with Fox News, Mr Trump suggested that if China did not treat the US properly, it might decouple the US economy from China’s.
- China’s People’s Liberation Army (PLA) has released information about several major military exercises in recent days. According to the announcement of the maritime administrations in Qingdao, dalian, tangshan and guangdong, the people’s liberation army (PLA) will organize a series of live-fire military exercises in the south, yellow and south seas from August 22 to August 29.
Fundamentals negative factors:
- The US Food and Drug Administration has approved the emergency use of plasma in COVID-19 patients, amid reports that the Trump administration may expedite the approval of a vaccine candidate.
- China and the US made a phone call. On the morning of August 25, Liu He, member of the Political Bureau of the COMMUNIST Party of China (CPC) Central Committee, Vice Premier of the State Council and Chinese leader of the China-Us Comprehensive Economic Dialogue, spoke by telephone with US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin. The two sides held a constructive dialogue on strengthening macroeconomic policy coordination and implementing the first phase of the economic and trade agreement between the two countries. The two sides agreed to create conditions and atmosphere to continue to push forward the implementation of the first phase of the China-Us economic and trade agreement.
- Us business activity rebounded sharply in August to its highest level since early 2019, data showed on Friday, with a rebound in new orders in both manufacturing and services.
- The leaders of The US Democrats and Republicans continued to exchange blame for the failure to agree on a new rescue plan on Sunday.