International spot gold was at $1698.50 an ounce in Asian trading on Tuesday (May 12). Gold had been trading in a fairly narrow range for some time, but now it has suddenly rebounded, raising more than $6 from the day’s low to as high as $1,699.70 an ounce.
At the same time, the dollar index on the day all the way up, up 25 points from the day low to a high of 100.45, now down from the high.
The dollar, usually a safe haven, rose strongly even as investors added risky assets to their portfolios, buying U.S. stocks and selling treasurys.
Analysts said the dollar remained strong as markets warned of a second wave of covid-19 as the global lockdown was lifted. The dollar is considered a safe store of value, comparable to gold in times of economic and political instability.
“The market’s concern that the economy is restarting too quickly, leading to a new wave of infections, should continue to keep investors cautious,” analysts at Action Economics wrote.
Still, Axel Merk, President and chief investment officer at Merk Investments, said, “this is not a typical safe-haven environment.”
On the one hand, Merk points out, there is evidence of hedging. The dollar index, which measures the greenback against a basket of currencies, rose 0.49 percent to close at 100.23 on Monday after hitting an intraday high of 100.30.
“We are seeing very strong short-term demand for the dollar,” said Daniel Ghali, commodities strategist at TD Securities. Gold is also caught between a huge outlook for monetary inflation, which should support its performance, and deflationary pressures from weak economic data. But in the longer term, this macro environment should actually lead to a weaker dollar, which is part of the positive outlook for gold. “
Inflation data will be released later in the day, followed by speeches from four top fed officials, including governor Charles quarles.
Us inflation data for April will be released at 20:30 Beijing time on Tuesday. The U.S. consumer price index is expected to rise 0.4 percent in April from a 1.5 percent rise in April, according to media surveys. The U.S. core consumer price index is expected to rise at a 1.7 percent annual rate in April from 2.1 percent.
“People’s expectations for the data to go down are still pretty solid,” said Ryan McKay, commodities strategist at TD Securities.
In terms of epidemic situation, Worldometers world real-time statistics show that, as of 10:16 on May 12, Beijing time, the global total number of confirmed covid-19 cases exceeded 4.25 million, reaching 4254,800, and the total number of deaths exceeded 287,000, reaching 287,293. The United States has the highest number of confirmed covid-19 cases in the world, with more than 1.38 million cases, totaling 1385,834, and more than 81,000 deaths, totaling 81,795.
At the same time, it is necessary to be on guard against the sudden rebound of the domestic epidemic, and be careful that the sudden change of market sentiment may lead to violent market fluctuations.
On the daily chart, the dollar index maintained a moderate rebound, the MACD red kinetic energy column slightly expanded, the KDJ random index further higher, indicating that the dollar upward momentum is still in place, the next expected to continue to rebound.
On the 4-hour chart, the U.S. dollar index maintained upward momentum, the MACD red momentum column expanded, the KDJ random index slightly under pressure, indicating that the dollar will continue to expand short term gains.
Daily chart, the gold price to maintain a narrow consolidation trend, now slightly under pressure. The MACD green kinetic energy column held steady, while the KDJ stochastic index was slightly under pressure, indicating gold pullback kinetic energy is still there and may continue to weaken.
4 hour chart, gold prices remain under pressure downward momentum, MACD green kinetic energy column unchanged, KDJ random index remains under pressure, indicating that gold short term will continue to fall under pressure.
Fundamental positive factors:
- Worldometers world real-time statistics show that as of 6:49 on May 12, Beijing time, the global total number of confirmed covid-19 cases reached 4246,795, and the total number of deaths reached 286,740. The cumulative number of confirmed covid-19 cases in the United States has reached 1384,033, and the cumulative number of deaths has exceeded 81,703.
- The White House has asked employees working in the west wing to wear face masks, except when seated at their desks, two senior administration officials said Monday.
- U.S. senator Menendez says republicans will sign a $500 billion spending bill and a fourth federal stimulus package for states and counties.
- Futures traders are pricing in the possibility of negative us interest rates within months. The federal funds rate contract extended this week’s gains, pushing futures above 100 in the first quarter of 2021, suggesting that the benchmark U.S. interest rate will go negative in the future. Fed chairman colin Powell has been adamantly opposed to the idea of interest rates falling below zero, but that hasn’t stopped traders from speculating, and dovish price moves swept through money markets on Thursday. Euro-dollar options, usually used as a hedge against fed policy action, suggest the fed’s policy rate will be as low as minus 45 basis points by mid-2021.
Fundamental negative factors:
- Markets warn of a possible second wave of covid-19 as the global lockdown is lifted, markets are rushing to the safety of the us dollar, putting pressure on dollar-denominated gold. Businesses from Paris to Shanghai are opening their doors as Germany reports an accelerating rise in new infections following initial measures to ease the lockdown. South Korea has also seen a rebound in infections. South Korea says the number of confirmed covid-19 cases linked to Seoul nightclubs has risen to 94.
- Friday’s labor department data showed 20.5 million jobs were lost in April, better than the 22 million expected, limiting the appeal of gold. The unemployment rate was 14.7%, below market expectations of 16%. Despite the lowest level on record, optimism that the worst is behind us as the economy reopens is growing.
3, local time on May 7, the world health organization (who) European office held a press conference, European office director Hans Kruger said, according to data from across Europe, starting from April 12, a day confirmed COVID – 19 cases began to decrease, although slow, but we sure, we saw such a positive signal, COVID – 19 outbreak began to ease.
- According to the New York times, US President Donald trump is considering cutting taxes for businesses in his next economic stimulus bill. Mr Trump said payroll and capital gains tax breaks should be considered, and liability guarantees and business tax breaks for restaurants and entertainment venues must be considered. If the stimulus works, a gradual economic recovery could dampen risk aversion.