In Asian trading on Thursday, spot gold was just above $1,950 and up more than $20 from the day’s lows as it tried to stabilise after yesterday’s tumble. Silver, meanwhile, extended gains above $27.
Gold took a beating yesterday, falling more than $80 from the $2,000 mark to below $1,930 after the Federal Reserve released minutes of its meeting that were less dovish than expected.
Yesterday the US announced it was suspending its agreement with Hong Kong to hand over fugitives. The US State Department said it had formally informed Hong Kong on Wednesday that Washington had suspended or terminated three bilateral agreements with The territory relating to the transfer of fugitives, the transfer of convicted persons and double taxation relief on international shipping income following China’s implementation of its version of the national security law.
Morgan Ortagus, a US State Department spokesman, said the measures highlighted the us’s deep concern about the Hong Kong version of the security law, which it said undermined the freedom of Hong Kong people.
It is worth noting that the United States has become the latest member of the Five Eyes Alliance to suspend the agreement with the Hong Kong SAR to hand over fugitives, following Canada, Australia, The United Kingdom and New Zealand.
On top of that, there was new news on China-Us trade. The United States and China plan to reschedule talks on a trade pact postponed over the weekend to assess progress on the pact in the past six months, Bloomberg news reported Tuesday, citing people familiar with the matter.
Although no specific date has been set for the talks, the assessment will take place soon, according to people familiar with the matter.
Separately, the Wall Street Journal reported on August 19 that Chinese and U.S. trade negotiators plan to discuss by video in the coming days the implementation of the terms of the first phase of the trade agreement and U.S. actions against Chinese technology companies.
It isn’t clear why the two sides haven’t set a specific date, but the postponement gives China more time to buy U.S. goods and shows it is working toward that goal.
Trade experts who closely follow the U.S.-China trade talks say the discussions on the first phase of the trade agreement are more symbolic than substantive, the Wall Street Journal reported.
Liu He, China’s vice-premier, plans to raise technical issues at the talks, according to Chinese officials, and will invoke language from the first phase of the us-China trade agreement to call on both sides to resolve “any existing and future trade and investment issues in a constructive manner and at the fastest possible speed”.
Chinese negotiators are expected to seek adjustments to the us-China trade agreement to take price fluctuations into account, Chinese officials said.
As for gold’s outlook, George Gero, managing director of RBC Wealth Management, said in a note that higher equity markets and efforts to stabilize the dollar are acting as short-term headwaters for the precious metal.
However, he added that any fall in gold would attract low-demand buying because of concerns about the global economy and expectations that more debt issuance and stimulus measures would boost inflation.
On the daily chart, the DOLLAR index after yesterday’s strong rebound after the high consolidation, trading in the day near the 93 mark. The daily MACD red kinetic energy column is gradually expanding, and the KDJ random index is holding steady below the 50 level, indicating that consolidation is likely to follow.
On the 4-hour chart, the DOLLAR index.DXY rebounded strongly yesterday from a 27-month low to move back above the key 93 level, with an eye on 100-period moving average resistance. The SHARP expansion of the MACD red momentum column and the strong rebound of the KDJ random index near the overbought level indicate the strengthening of bullish momentum for the dollar, but guard against consolidation caused by too rapid a rise.
On daily charts, gold tumbled more than 3.5 per cent yesterday, at one point dropping more than $80 to below 1930, its biggest one-day fall since August 11. The daily MACD green momentum column is turning to expand, with the KDJ random index trading around 50, indicating gold bearish momentum is strengthening and a consolidation may follow.
In the four-hour chart, gold has fallen sharply from its highs, hitting a low of $1,924 at one point, supported by its 200-day moving average below. The MACD green momentum column gradually expanded, and the KDJ random index stabilized after falling below the 50 level, indicating that gold bearish momentum strengthened, short term or further volatility.
On daily charts, silver also fell more than 3 per cent yesterday, missing the key $27 mark but remaining above its main average. A small expansion in the green momentum column on the daily MACD chart, with the KDJ random index hovering above the 50 level, indicates that bearish momentum is strengthening in silver or further consolidation.
On the 4-hour chart, silver continued to retreat from its high, but the decline stopped near its 100-session average. The MACD green momentum column expanded slightly, with the KDJ random index trading below the 50 level, indicating slightly stronger bearish momentum in silver, short term or further volatility.
Fundamentals positive factors:
- The US State Department said it had formally informed Hong Kong on Wednesday that Washington had suspended or terminated three bilateral agreements with Hong Kong following China’s implementation of the territory’s version of the national Security law.
- U.S. President Donald Trump said on Tuesday that he canceled a weekend trade negotiation with China, calling China’s treatment of Novel Coronavirus “inconceivable.”
- U.S. Treasury Secretary Steve Mnuchin said, “President Trump’s executive order on unemployment has been approved in five states and is expected to be approved in all states. Us Democrats want a 4 trillion dollar deal. If it makes sense, there is hope.”
- On Monday, the United States announced that it was tightening restrictions on Huawei, adding 38 Huawei entities in 21 countries to its list of export control entities.
Fundamentals negative factors:
- The Minutes of the Fed’s meeting showed policymakers are considering a change in monetary policy that could keep the central bank’s massive stimulus program in place for longer than expected in previous statements. More dovish monetary policy measures such as yield curve control have been ruled out for now. The dollar strengthened as a result.
2. White House economic adviser Scott Kudlow said the economy was rebounding “very, very strongly” and that additional unemployment benefits would be paid out in two weeks.
3. The S&P 500 closed at a record high on Tuesday, fully recovering from the February novel Coronavirus crisis crash.
4. Data on Monday showed confidence among U.S. home builders rose for a third straight month in August, tying a record high.