In Asian trading on Tuesday, the dollar held firm while spot gold briefly touched the key 1910 barrier and silver extended losses to below $25.
Asia had a solid start to the morning, with little disruption in currency markets, but the sudden buying of the US dollar pushed down some currencies, most notably the Australian dollar, while stock index futures also took a hit.
It was subsequently reported that Johnson & Johnson had suspended trials of a candidate vaccine for COVID-19. The sharp drop in “risk on” trading came long before the news hit financial markets.
The selling eased for about an hour, but has since widened further, with risk currencies and stocks continuing to fall.
Normally, once sentiment takes a hit, people focus on other, less favorable news.
China’s condemnation of reports that the US would sell advanced weapons systems to Taiwan has returned to the fore. China’s statement and response were made hours ago.
According to Reuters, five people familiar with the matter said on Monday that the White House was moving forward with three deals to sell advanced weapons to Taiwan, and in recent days it has sent a notification of the deal to Congress for approval.
Citing sources, Reuters reported in September that the U.S. intends to sell Taiwan as many as seven major weapons systems, including landmines, cruise missiles and drones, as the Trump administration ratchet up pressure on China.
Leaders of the Senate foreign Relations and House foreign Affairs committees have been informed that three of the planned arms sales have been approved by the State Department, which oversees foreign arms sales, the sources said on condition of anonymity.
Asked to respond to Monday’s news, the Chinese embassy in Washington, in an e-mailed statement, urged the United States to halt arms sales to Taiwan and end military relations with the island “so as not to seriously harm China-Us relations and peace and stability across the Taiwan Strait.”
The German-language media pointed out that there was no turning back in the US-China dispute. The business Daily commented that even if Biden, a Democrat, is elected as the next US President, the dispute between the two superpowers will not be over, but just the way of the dispute will change.
On the daily chart, the DOLLAR index.DXY tried to rebound after four straight days of losses and is now testing 50-day resistance. The daily chart MACD green momentum column gradually expanded, with the KDJ stochastic hitting the oversold level, indicating a strengthening of short-term bearish momentum, but oversold may bring a corrective rebound.
On the 4-hour chart, the U.S. dollar index.DXY, which had earlier hit a low of 92.99, tried to rebound, maintaining a volatile overall pattern. The MACD green momentum column gradually contracted and the KDJ random index tried to rebound from the oversold level, indicating that bearish momentum on the dollar was slowing and the short term might stabilize higher.
On daily charts, gold fell after yesterday’s fruitless rally and continued to come under pressure to hit a low of $1,910. The red kinetic energy column of the daily chart MACD has basically stabilized, and the KDJ stochastic index is approaching the overbought level, indicating that the bullish momentum of gold is not strong, so watch out for a correction.
After hitting a high of $1,933, the four-hour chart shows gold’s rally faltering and it is now close to the key 20-period average support, with a break towards the 1900 level. The MACD red kinetic energy column continues to contract, and the KDJ random indicator drops sharply from the overbought level, indicating that the bullish momentum for gold continues to slow and may move lower in the short term.
On daily charts, silver was trading below $25 after breaking high near its 60-day moving average yesterday. The daily MACD red momentum column gradually expanded, with the KDJ stochastic easing below the overbought level, indicating that silver’s bullish momentum strengthened but the rebound was short on momentum.
In the 4-hour chart, silver has continued to move lower after approaching its key 200-day moving average of 25.85, and is now below its 20-day moving average of $24.55. The MACD red kinetic energy column gradually weakens and almost disappears, and the KDJ random index is down from the overbought level, indicating that the bullish momentum of silver is weakened, short term or further downward.
Fundamentals positive factors:
1.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.
- Trump once again referred to novel Coronavirus as a “China virus.” “The President is in great shape,” he said. “I’ve beaten this crazy, scary Chinese virus, I’ve passed the highest standards of testing, and I’m in good health. I have to tell you, I feel great.” The remarks suggest that tensions remain high between China and the United States.
- On Friday, U.S. President Donald Trump gave the global risk market a jolt with the novel Coronavirus Stimulus plan ($1.8 trillion). The stimulus package is good for gold.
Fundamentals negative factors:
- The Trump administration on Sunday called on Congress to use the remaining money from an expiring small-business loan program to pass a leaner version of the New Coronal-aid 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.
- The U.S. Labor Department said new claims for unemployment benefits fell 9,000 to 840,000 in the week ended October 3, compared with market expectations of 820,000. Jobless claims were higher than expected, which suggested the labor market was not doing too well, bearish on the dollar and bullish on gold.