Spot gold held a consolidation stance above 1700 on Thursday, largely holding on to gains from the previous day, as markets watched for further news on U.S. trade with China and U.S. initial jobless claims.
Gold surged to close above $1,710 near $1,720 a day after fed chairman colin Powell rejected the idea of negative interest rates as a stimulus tool but hinted at more stimulus ahead.
Statistics from real-time data update website worldometers show that as of 10:27, Beijing time on May 14, there were more than 4.42 million confirmed cases of covid-19 worldwide, with a total of 4,429,223 confirmed cases and 298,165 deaths of more than 298,000.
Among them, there were more than 1.43 million confirmed cases of covid-19 in the United States, or 1,430,348 cases, and more than 85,000 deaths, or 85,197 cases.
The outbreak has had a huge impact on the global economy, and recent economic data in the United States have raised concerns, leading to the idea of negative interest rates from the federal reserve.
The effectiveness of negative interest rate policy remains a subject of debate among central Banks around the world. The idea has at least one high-profile fan — U.S. President Donald trump, who tweeted again this week in support of negative interest rates.
But fed chairman colin Powell sent a clear message to interest-rate futures traders on Wednesday: it would be a mistake to bet against the fed.
Mr Powell warned on Wednesday that weak economic growth and stagnant incomes would continue “for an extended period”, promising that the fed would use more tools as needed and calling for more fiscal spending to prevent the consequences of the coronavirus pandemic.
However, Mr Powell did not budge on the issue of negative interest rates, which is uppermost in the market’s mind. “The committee’s view on negative rates really hasn’t changed. That’s not something we’re thinking about, “Powell said in response to a question at an event sponsored by the peterson institute for international economics.
Since Powell’s speech, interest rate futures have discounted the possibility of a negative rate.
Mr Powell is not the latest monetary policymaker to dismiss the idea of negative interest rates. At least six of the fed’s 12 regional bank presidents have dismissed the idea. Speaking at Wednesday’s event, Mr. Powell noted that there is a rare degree of agreement among policy makers on the idea.
Market participants said they were relieved that Mr Powell had hinted that the fed would not cut interest rates below zero, but his gloomy view of the economy appeared to surprise some.
Mr. Powell’s tone was more downbeat than in recent days, said Charles schwab’s Mr. Kleintop. “The market concluded that there could be more bad news than they expected,” he said.
“What he’s saying is that if you want to avoid a slow economic recovery and long-term damage to the economy, you need a strong fiscal response that effectively returns responsibility to the government, not the central bank,” said Shawn Cruz, trader strategy manager at TD Ameritrade.
After Powell’s remarks, U.S. President Donald trump said Wednesday he still strongly believes the federal reserve should implement negative interest rates, but gave the fed chairman some credit.
“The fed has many other options, so we could see more quantitative easing or a sustained policy that creates a positive environment for the gold market,” said standard chartered bank analyst Suki Cooper.
“We expect global interest rates to remain low, with some countries experiencing negative rates, which will continue to provide a favourable environment for gold,” Cooper said.
On the daily chart, the dollar index in the last day rebound after holding gains, now trading above the 100 level, above the main moving average level. On the technical side, the MACD red kinetic energy column appears initially, the RSI index hovered around 50, and the KDJ random index approached the overbought level, suggesting that there is still room to rise.
On the 4-hour chart, the usd index appears to be forming up highs and lows, with a focus on whether the recent high of 100.40 can be broken, which will confirm the uptrend. MACD red kinetic energy column slightly expanded, KDJ random index approaching the overbought level, short – term is still expected to rise.
Daily chart, the gold price to maintain a high consolidation pattern, currently trading above the 1700 level, above the main average level. The MACD green kinetic energy column weakened slightly, and the KDJ stochastic index approached the overbought level upward, suggesting continued volatility.
As you can see from the 4-hour chart, gold has also formed a series of moving highs and lows. We are now looking to see if we can break out of the previous high of $1,723. MACD red kinetic energy column stabilized, KDJ random index hit the overbought level, beware of short – term correction.
Fundamental positive factors:
- According to statistics from real-time data update website worldometers, as of 10:27 Beijing time on May 14, the global total number of confirmed covid-19 cases exceeded 4.42 million, with a total of 4,429,223 confirmed cases and 298,165 deaths exceeding 298,000.
- Federal reserve chairman colin Powell said on Wednesday policymakers may have to use more weapons to pull the United States out of the economic mire, but flatly rejected negative interest rates, saying the central bank was not considering such a move.
- The head of the international monetary fund said it was “very likely” that global growth forecasts would be cut further because many economies had been hit harder by the outbreak than previously thought.
- The novel coronavirus that has killed 80,000 americans has not been brought under control and treatments and vaccines may not be ready until late August or early September, Anthony Fauci, director of the national institute of allergy and infectious diseases, told congress on Tuesday.
Fundamental negative factors:
- U.S. President Donald trump said on Wednesday he still strongly believes the federal reserve should implement negative interest rates, but gave a nod to fed chairman colin Powell.
- Atlanta federal reserve bank President Raphael Bostic said recently that negative interest rates are not a good option in a time of crisis.
- James Bullard, President of the st. Louis federal reserve bank, reiterated scepticism about negative interest rates, noting that the strategy has a history of mixed results and “is not a very good solution for the United States.” Dallas federal reserve bank President Robert Kaplan recently told CNN he opposes negative interest rates.
- Amid rising tensions between China and the United States, China’s tariff commission of the state council on Tuesday announced a new list of goods to be exempted from additional U.S. tariffs, including 79 items including rare earth metals and gold ore.