In the Asian session on Friday (August 28), spot gold maintained a firm stance, pulling up $10 on the day close to the 1940 mark, while silver extended gains to 1%.
Yesterday, Federal Reserve Chairman Powell announced a major policy adjustment, gold shock roller coaster market, short – term huge shock.
The Fed said it would seek to achieve an average inflation target of 2 per cent, offset periods of sub-2 per cent inflation with high inflation for “an extended period” and launched an aggressive new strategy to boost employment. The move had been widely expected.
After the news, gold continued to rally above $1970 in the short term, but as the dollar rebounded with rising Treasury yields, gold quickly gave back its gains, falling sharply from its peak to around $1909.
In the course of the day, the MARKET will focus on THE U.S. PCE data, and the situation in China and the U.S. will remain the focus.
New news on China-Us trade. The tone of Gregg Doud, the chief US agriculture negotiator, was toned down when assessing China’s commitment to farm purchases under the first phase of the trade agreement.
Gregg Doud, speaking at a network meeting of the U.S. Soybean Export Council, sidestepped comments on the binding nature of the first-phase trade agreement, enforcement mechanisms and the ability to reimpose tariffs, Bloomberg reported.
Asked about sanctions against non-compliance, he stressed: “This is a two-year commitment,” referring to the deadline for the trade agreement signed in mid-January and coming into force a month later.
Thursday’s remarks contrasted sharply with previous statements by the U.S. trade representative’s top agriculture negotiator. At the U.S. Department of Agriculture’s annual forum in February, he said the two countries would meet monthly to discuss progress and that failure to abide by the agreement could result in tariffs equal to the losses each country would incur.
“The two sides will continue their dialogue and discussions,” he said in the speech. “Keep in mind that this is a two-year commitment, so you have to watch over a period of time. I know everyone wants to measure progress month by month. At least from my perspective, we have to wait and see for a while.”
China’s agricultural purchases to the United States have been falling short of the $36.5 billion promised for 2020. U.S. agricultural and related exports to China from January to July totaled $7.63 billion, about 23% of the target, according to U.S. Census Bureau data released Tuesday. The USDA forecast also casts doubt on whether the two-year target will be met.
Doud is optimistic about meat sales to China, where pork exports hit a record in the first half of the year. He added that China had bought a lot of corn and recently increased its purchases of soybeans, returning to pre-trade levels
In addition to agricultural purchases, China completed 50 of the 57 structural reforms in the agreement to promote agricultural trade, he said. He highlighted the opening of beef and poultry markets and reforms to boost dairy exports by more than 20 per cent. Some 3,500 US factories are allowed to export agricultural products to China, up from 1,500 previously.
He said that China and the United States continue to have a lot of discussions and dialogues not only in the agricultural field, but also in various fields. The Chinese have indicated on many occasions that they intend to do so, and believe they will see them do so in recent weeks. “They’re not just talking, they’re actually buying, and now they want to maintain that pace.”
As for the gold outlook, TD Securities believes that gold prices are expected to consolidate in the short term, but remains bullish on the long-term outlook due to depressed real interest rates due to macroeconomic conditions.
Daniel Pavilonis, senior commodity broker at RJO Futures, noted that despite Thursday’s fall, the overall picture remains very positive for gold. “The market as a whole remains bullish due to the long-standing zero interest rate and flexible 2 per cent inflation target. That means that even if we get to 2 per cent, it doesn’t mean the Fed is going to start raising rates. These are still very solid conditions for metals markets, “he said. “We are in a fragile state. It does not take much to push interest rates below zero and into negative yields. That will ultimately push metals prices higher.”
Pavilonis added that he sees these price falls as a buying opportunity for gold to return to its pre-$2,000 level.
On the daily chart, the DOLLAR index.DXY was mostly flat after yesterday’s steep fall and gains and was trading around 92.90. The daily chart MACD red kinetic energy column was basically stable, while the KDJ random index held steady above the 50 level, indicating short-term or continued volatility.
On the 4-hour chart, the DOLLAR index briefly dipped below 92.40 yesterday before quickly recovering to watch the reaction to its 50-period moving average. The MACD green momentum column gradually contracted and nearly disappeared, while the KDJ random index hovered around the 50 level, indicating the dollar bearish momentum weakened, short term or continued volatility.
On daily charts, gold rallied sharply yesterday after a sharp fall back around 1930, inching up for the day. The daily MACD green momentum column weakened slightly, with the KDJ random index falling below the 50 level, indicating a slowdown in bearish momentum for gold, although downside risks remain.
On the 4-hour chart, gold briefly rose above its 100-period average yesterday before quickly retreating and is now hovering around its 200-day moving average. The MACD red column is very weak with the KDJ stochastic approaching the 50 level, indicating weaker bullish momentum for gold and further consolidation in the short term.
On daily charts, silver is still trading above $27, following a narrow, volatile pattern seen in previous days. Daily chart MACD green momentum column slightly weakened, KDJ random index held steady near the 50 level, indicating silver bearish momentum weakened, price may further volatility.
On the 4-hour chart, silver moved around its 100-period moving average yesterday and is still wrapped around that level. The MACD red momentum column is very weak, with the KDJ random index holding steady near the 50 level, indicating a lack of bullish momentum for silver, short term or further volatility.
Fundamentals positive factors:
- Mr Powell said the Fed would seek to achieve an average inflation target of 2 per cent, offset periods of sub-2 per cent inflation with high inflation for “an extended period” and launched an aggressive new strategy to boost employment, with the policy generally bearish for the dollar.
- The Chinese Defense Ministry on Thursday stressed that China would neither play along with the US nor invite the US hu to come, as US Defense Secretary Esper said it would not concede any land in the Indo-Pacific region. The risk of military conflict in the South China Sea has risen sharply.
- The South China Morning Post quoted a source as saying that China fired two missiles into the South China Sea on the morning of June 26, one of which was the DF-21D “carrier killer” anti-ship missile to send a clear warning to the US.
- CNBC quoted sources as saying That Republicans are preparing to unveil a new $500 billion anti-epidemic bill to lawmakers as soon as next week.
Fundamentals negative factors:
- House Speaker Nancy Pelosi issued a statement saying Democrats and Republicans remain far apart on the next economic stimulus package.
- U.S. stocks surged on Wednesday, pushing the S&P 500 to a record closing high for a fourth straight session, as investors remained focused on broader momentum stocks that have outperformed since the outbreak of the coVID-19 pandemic.
- Holdings in the SPDR Gold Trust, the world’s largest Gold ETF, fell 3.51 tonnes, or 0.28 per cent, from its current position of 1248.87 tonnes.
- 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.