As risk sentiment remained cautious in Asian trading on Thursday, the dollar was little changed, while spot gold tried to hold its footing after yesterday’s sharp fall, trading near 1880 and silver tried to stabilize after a 4 percent plunge.
For the moment, gold remains closely linked to the us dollar and yesterday saw heavy selling in European and US equity markets but as safe havens poured into the dollar, gold followed equities lower, at one point passing the $1,870 mark. Analysts also pointed out that many investors sold gold to make margin calls as the stock market tumbled.
“The metal’s reliance on more stimulus is so high right now that the bears are in full control,” said Bob Haberkorn, senior market strategist at RJO Futures in New York. In general, gold has weakened against a stronger dollar due to a lack of stimulus and risk aversion ahead of the election.”
Asian stock markets fell in early trading on Thursday after Wall Street slumped amid a continuing surge in cases of the coronavirus in the West.
Rising cases of the coronavirus in the US and Europe are likely to weigh on investor sentiment in the Asia-Pacific region on Thursday.
The number of new coVID-19 cases in the United States hit a record high for a third straight day on Tuesday. In Europe, Germany and France on Wednesday announced tough new restrictions on businesses in an effort to curb the spread of the coronavirus. Both countries are dealing with the worsening situation.
As the coVID-19 outbreak in Europe continues to worsen, German Chancellor Angela Merkel has announced a new one-month local lockdown across the country next Monday. In addition, France imposed a nationwide city lockdown from Friday until December 1.
“The inability to control the ‘second wave’ has led to the reimposition of stricter social restrictions in Europe (led by Germany and France) and there are serious concerns that the U.S. and U.K. with similar recovery patterns will have to follow,” Wrote Mizuho bank’s head of economics and strategy, Vishnu Varathan, in a report.
“It’s clear that the epidemic is out of control, the number of cases is soaring, and things are bad,” said Eric Kuby, chief investment officer at North Star Investment Management. “The notion that the virus will go away is just a false assumption.”
Investors, meanwhile, are nervous about the looming US election. With just six days to go before the election, Wall Street’s panic index rose to its highest level since June 15. Fears that the winner might not be announced on the night of November 3 also fuelled a sell-off.
Democratic presidential candidate Joe Biden leads President Trump by 10 percentage points nationwide, according to a Reuters/Ipsos poll, but the race is too close to call in swing states.
Chris Zaccarelli, chief investment officer of the Independent Advisor Alliance, said investors are worried about a variety of potential outcomes: the election could be controversial; The “blue wave” gave Mr Biden a landslide victory, giving Democrats control of Congress; Or Trump being reelected. “When people analyze what the election might look like, there are no good answers in the short term.”
On the daily chart, the dollar index.DXY rose as high as above 93.60 and is now finishing gains near 93.40. Daily chart MACD green momentum column weakened slightly, KDJ random indicator above the 50 level, indicating that short-term bearish momentum weakened, price or rebound.
On the 4-hour chart, the DOLLAR index has formed an upwardly mobile low and the key 200-day moving average resistance has been breached. Watch for a firm close to this level. The MACD red momentum column began to weaken slightly, with the KDJ stochastic approaching the overbought level, indicating a slowdown in bullish momentum for the DOLLAR and a near-term or consolidation.
On the daily chart, gold’s tumble yesterday took it from its key 100-day moving average to support $1,887 and the focus was on returning to that level. The daily chart MACD green momentum column showed initial signs, with the KDJ random index falling below the 50 level, indicating that bearish momentum for gold has strengthened and is now prone to choppy declines.
The 4-hour chart shows gold falling particularly hard, dipping below $1,869 at one point before losing all moving average support. The MACD red momentum column remains strong and the KDJ random indicator is approaching the oversold level, indicating that there is still room for further downside in the short term.
On daily charts, silver slumped as much as 6 per cent yesterday to hit the $23 mark and is now hovering around its 100-day moving average of 23.43. The daily chart MACD green momentum column showed initial signs, with the KDJ random index falling below the 50 level, indicating silver bearish momentum strengthening or further choppy lower.
Silver, which plunged as much as $23 yesterday, has lost all of its moving average. The MACD green momentum column is strong, with the KDJ stochastic approaching the oversold level, indicating that bearish momentum remains in silver and short term or further weakness.
Fundamentals positive factors:
- As coVID-19 continues to worsen in Europe, German Chancellor Angela Merkel announced a new round of local lockdown across the country for one month next Monday. In addition, France imposed a nationwide city lockdown from Friday until December 1. — Risk aversion triggered by the worsening epidemic is good for gold.
- The U.S. Department of Justice has indicted eight Chinese nationals for their alleged role in China’s fox hunt, threatening, harassing, monitoring and intimidating a number of Chinese nationals in the United States and forcing them to return to their homeland for trial. — Risk aversion due to china-us tensions has supported gold prices.
- The situation between China and the United States is tense again. In the space of a week, The US Congress approved two arms sales to Taiwan. On October 21, the US announced the sale of $1.8 billion worth of equipment to Taiwan. On October 26, the US again announced the sale of 100 Harpoon coastal cruise missile systems to Taiwan for a total of $2.3 billion. — Risk aversion due to china-us tensions has supported gold prices.
- Europe and the US showed signs of worsening, with the US, Russia and France recording a record number of new cases in a single day. The number of corona-related hospitalizations in the US jumped to its highest level in two months. — A worsening epidemic will trigger risk aversion, which is good for gold.
Fundamentals negative factors:
- The White House press secretary on Tuesday played down the prospects for an agreement on a massive Covid-19 aid package before the November 3 U.S. presidential election, accusing House Speaker Nancy Pelosi of asking for too much. — The pre-election stimulus package is bearish for gold.
- Mitch McConnell, the Senate majority leader, has adjourned the Senate until November 9 as the chances of the White House and Democrats reaching an agreement on a new bail-out package before the election look slim. A stimulus package is almost impossible to come by before the election, which is bad for gold.
- House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin traded accusations Friday that they should help move the talks forward. The chances of passing a stimulus bill before the election are fading fast. Pelosi said Trump should push negotiations and get Republicans to agree to any deal with the White House on a nearly $2 trillion aid package. Mr. Mnuchin, the White House negotiator, said significant progress had been made, but accused Ms. Pelosi of stalling by refusing to compromise Democratic priorities. The stimulus bill has been slow to come to fruition.