In Asian trading Wednesday, spot gold rebounded from a low near $1882 and is now back above 1890, while silver is back above $24.
Gold was hit hard yesterday, falling from just above $1,920 to near $1,886 as the dollar rose and the IMF raised its global economic forecasts.
Tuesday, HOUSE Speaker Nancy Pelosi rejected Trump’s latest proposal ona Novel Coronavirus rescue, suggesting a deal ona CoVID-19 rescue is unlikely before the November election.
In a letter to her colleagues, Pelosi outlined what Democrats see as the shortcomings of the White House’s $1.8 trillion economic stimulus plan. The plan has also met resistance from Republicans in the US Senate, who say it is too big.
On the same day, the International Monetary Fund (IMF) said in its latest World Economic Outlook that it had raised its forecast for the global economy for the full year to a contraction of 4.4 percent, up 0.8 percentage points from its June forecast, as the economy recovered strongly in the third quarter. However, the IMF cut its forecast for economic growth next year to 5.2 per cent, down 0.2 percentage points from its previous forecast.
The IMF raised its forecast for China’s economic growth this year to 1.9 per cent, up from 1 per cent previously. Next year it is forecast to grow by 8.2%.
“Stalled negotiations in Washington over the next stimulus package continue to weigh on assets like gold, which are dependent on a weaker dollar for the next wave of support,” said David Meger, head of metals trading at High Ridge Futures in New York.
“Institutions like the INTERNATIONAL Monetary Fund and the Federal Reserve have also pointed out that the economy is recovering more quickly than they initially expected, which would lead us to believe that it may be necessary to reduce stimulus measures around the world,” Meger said.
But geopolitical tensions continue to provide some support for gold. The White House is pushing ahead with two more arms sales to Taiwan after China warned it would respond as necessary.
The White House notified Congress on October 13 that it has approved two more arms sales to Taiwan and expects to sell a drone and a coastal defense missile system to the island, Reuters reported on Tuesday, following a state Department report on Wednesday. Sources have also told Reuters that the US and Taiwan are discussing the transfer of weapons production technology.
According to the report, the two advanced weapons announced on The 13th are MQ-9 unmanned aerial vehicle and Boeing-made shore harpoon anti-ship missile. Among them, the MQ-9 uav, a large unmanned aerial vehicle developed by General Atomics Aeronautical Systems For the U.S. Air Force, was first sold to Taiwan. And the Trump administration has previously revealed that it will sell more drones to more countries.
Reuters reported earlier that the White House had told Congress to seek approval for three arms sales to Taiwan, including high-mobility rocket systems, long-range air-to-surface missiles and sensors for F-16 fighter jets.
In response to Beijing’s firm opposition, Chinese Foreign Ministry spokesman Zhao Lijian said on the same day that the US should immediately cancel any planned arms sales to Taiwan and stop arms sales and military contacts with the US and Taiwan. China will make a justifiable and necessary response according to the development of the situation.
Zhao stressed that the US arms sale to Taiwan seriously violates the One-China principle and the three China-Us joint communiques, especially the provisions of the 817 Communique, seriously interferes in China’s internal affairs and seriously undermines China’s sovereignty and security interests. China is firmly opposed to this.
The US would seek a one-off sale of seven weapons to Taiwan, a rare break with years of practice. In the past, U.S. arms sales to Taiwan have been scattered and carefully planned to minimize tensions with The Chinese government.
On the daily chart, the U.S. dollar index rebounded strongly above the 93 mark, rising above the key 60-day moving average and consolidating at present. The daily chart MACD green momentum column gradually contracted, and the KDJ random index rebounded from the oversold level, indicating that short-term bearish momentum weakened or further rebound.
On a 4-hour chart, the DOLLAR index.DXY rallied strongly yesterday, now hovering near its 60-hour moving average. The MACD red momentum column gradually expanded and the KDJ random index hit the overbought level, indicating increasing bearish momentum on the dollar and short-term caution for a pullback.
Look on the daily chart, gold fell yesterday once fell to the 1890 barrier, tried to stabilize at the low level. Daily chart MACD red kinetic energy column slightly weakened, KDJ random index down close to the 50 level, indicating that gold bullish momentum is not strong, there is still room for downside.
On the 4-hour chart, gold fell from its peak to its 100-hour moving average of $1,893, with the day’s focus on whether it could close above that level. The MACD green momentum column gradually expanded, and the KDJ random indicator hit the oversold level, indicating strong bearish momentum for gold and hope to stabilize in the short term.
On daily charts, silver fell nearly 4 per cent yesterday and is hovering around $24. The daily MACD red column is very weak, with the KDJ stochastic coming down from around the overbought level, indicating a lack of bullish momentum for silver or further weakness.
On the 4-hour chart, silver prices fell close to the key 100-period average support, watching to see if the 23.85 low can be held. The MACD green momentum column gradually expanded, with the KDJ stochastic hitting oversold levels below, indicating that bearish momentum has strengthened in silver, but oversold may lead to a correction.
Fundamentals positive factors:
- Lilly Pharmaceuticals Inc. said Oct. 13 it is suspending a trial of a novel Coronavirus combination antibody therapy for safety reasons, CNN reported.
- The situation between China and the United States remains tense. The White House is pushing ahead with two more arms sales to Taiwan after China warned it would respond as necessary. The White House on Tuesday informed Congress that it had approved two more arms sales to Taiwan, expected to sell a drone and a coastal defense missile system, Reuters reported.
- The White House is moving forward with three deals to sell advanced weapons to Taiwan, sending a notification of the deal to Congress for approval in recent days, five people familiar with the matter said on Monday, Reuters reported. Us-china tensions are good for gold.
- Johnson & Johnson said it has suspended trials of its coVID-19 vaccine due to unexplained illness in a patient involved in a clinical trial of the vaccine. A moratorium on vaccine trials hinders progress, which is positive for gold.
Fundamentals negative factors:
- Us House Speaker Nancy Pelosi says President Trump’s latest coronavirus stimulus plan fails to meet US needs. The scale of the stimulus has delayed the launch of negative gold.
- The IMF said its forecasts for the global economy were “less dire” as the rich world and China recovered faster than expected. A faster-than-expected economic recovery could reduce stimulus measures around the world, bearish for gold.
- The Trump administration on Sunday called on Congress to use the remaining money from an expiring small-business loan program to pass a slimmer version of the New Coronationaid bill, as negotiations on a broader package remained blocked. The possibility of a slimmed-down coronavirus stimulus package will weigh on gold prices.
- A new $1.8 trillion economic stimulus plan proposed by the Trump administration ran into opposition from Democrats and Republicans in Congress on Saturday, with Democratic House Speaker Nancy Pelosi saying it did not adequately fund health resources such as virus tracking and testing. Massive government stimulus and central bank stimulus are both good for gold, and bad for gold if blocked.