Spot gold was trading above a session low on Tuesday, September 22, at $1,908 an ounce. Silver, meanwhile, traded in a narrow range at $24.56 an ounce. The DOLLAR index was little changed at around 93.56. Spot gold closed down $37.49, or 1.92 percent, at $1912.23 an ounce, after falling 3.4 percent to its lowest level since August 12 at $1882.60 an ounce, after peaking at $1955.40. Spot silver fell 8 per cent to $24.69 an ounce, dropping 10 per cent after hitting its lowest level in more than a month at $23.68. The dollar index.DXY closed up 0.56 percent at 93.53, having hit an intraday high of 93.78 and a low of 92.75.
The day after the death of Supreme Court Justice Ruth Bader Ginsburg on Friday, Trump said he would nominate a female conservative to fill the vacancy. Ginsburg’s death has added to the uncertainty in the U.S. presidential election, which is just over a month away and promises to be a hotly contested race between the two parties to fill the bench.
Zach Pandl, an economist at Goldman Sachs, believes the dollar will remain weak until the election, citing its high valuation, negative real interest rates in the US and the global economic recovery, which tends to put downward pressure on the dollar. A big Democratic victory in us elections could accelerate the trend, he said.
First, Biden’s proposal to raise the U.S. corporate tax rate would make U.S. stocks less attractive compared with other international markets, especially if all else being equal. If US stocks underperform, that could lead to a dollar sell-off. And regulatory changes, particularly in the technology sector, are likely to have similar effects.
Second, with the Federal Reserve committed to keeping interest rates low, a massive fiscal stimulus could also weaken the dollar. Academic studies have found that when unemployment is high and/or the central bank’s policy interest rate stays below its effective floor, money depreciates after fiscal expansion.
Finally, a more multilateral approach to foreign affairs would reduce risk premiums in some currencies, notably the renminbi. For that reason, Goldman recently lowered its target price of $12 million to $6.50. Goldman Sachs thinks the Biden administration could signal a reduction in the risk of trade disputes, so the yuan could then rise along with broader dollar weakness.
Looking ahead, the market is also watching to see if the recent bearish trend against the dollar has reversed. This week’s PMI readings for us manufacturing and services will provide a further insight into the state of the US economy and the outlook for the dollar.
Following the September meeting of the Federal Open Market Committee (FOMC), Federal Reserve Chairman Colin Powell will hold three separate congressional hearings with Treasury Secretary Steven Mnuchin.
At 22:30 on Tuesday, Federal Reserve Chairman Colin Powell and U.S. Treasury Secretary Steven Mnuchin will testify before the House Financial Services Committee. It is worth mentioning that Powell’s speech has been published in advance.
In remarks prepared for a hearing before the House Financial Services Committee on Tuesday, Powell said the U.S. economy is improving but still has a long way to go to fully recover from the coronavirus. He said a number of indicators showed that the US economy had improved significantly, but employment and overall economic activity remained well below pre-epidemic levels and the road to recovery remained highly uncertain. Powell also reiterated his commitment to support the economic recovery at all costs. In his testimony, Mr. Powell reiterated his earlier view that both fiscal and monetary policy needed to do more to prevent long-term damage to the economy.
Fundamentals positive factors:
According to world real-time statistics, as of 7:38 PM On September 22, the total number of confirmed cases of COVID-19 worldwide has exceeded 31.46 million, reaching 31,467,750, and the total number of deaths has exceeded 968,000, reaching 968,826. The United States has the world’s highest cumulative number of confirmed COVID-19 cases, with 7,043,346 cases exceeding 7.04 million. The cumulative number of deaths has exceeded 204,000, reaching 204,445.
In an apparent warning to China, Taiwan said on Monday its armed forces had the right to defend themselves and strike back in the event of “harassment and threats”. China last week sent a number of aircraft across the sensitive middle line of the Taiwan Strait. On Friday and Saturday, Chinese aircraft crossed the middle line into Taiwan’s air defense identification zone, prompting The island to scramble fighter jets to intercept them, with Taiwan’s leader, Tsai Ing-wen, calling China a threat to the region.
New Delhi: India on Monday demanded that China withdraw its troops from “concrete and complete” “friction points” such as Pangong Tso, Chushul and Gogra-Hotsprings, and finalised a road map for de-escalation across the eastern Ladakh border, according to a recent report in the Times of India. According to the Indian side, there is “some disconnect” between the five-point diplomatic consensus reached by Indian Foreign Minister Sushil Jaishankar and Chinese Foreign Minister Wang Yi during their meeting on September 10 and the “actual situation” along the LAC. A source said: “The PLA continues to strengthen its positions along the LAC. It does not seem ready to defuse the situation. Unless China agrees to make major concessions, it will be very difficult to achieve a substantive breakthrough.” Up to now, neither China nor India has released official information on the outcome of the sixth round of china-India military-ministerial meeting.
China is speeding up the creation of a blacklist of US technology companies, which officials believe should be delayed until after the US election, the Wall Street Journal reported. According to the report, the US President trump’s administration has intensified its attacks on a series of large Chinese companies, including Tencent, which is owned by WeChat, making it particularly urgent for China to develop a blacklist of us companies.
An interagency task force headed by Vice Premier Hu Chunhua has “activated” in recent weeks efforts to draw up a list of “unreliable entities” in an effort to counter US actions against Chinese companies, the newspaper sources said.
Fundamentals negative factors:
- Bytedance, Oracle and Wal-Mart have agreed in principle to cooperate with TikTok in order to ensure that 100 million US users can continue to use TikTok, meet the US government’s regulatory requirements and strengthen TikTok’s US business, according to the official official account of Bytedance on Tuesday.
- US President Donald Trump said in an interview with The Fox television program on September 21 that the coVID-19 vaccine is likely to be approved by the end of October. When asked which companies are most likely to develop coVID-19 vaccines, Trump said Pfizer is doing a good job and Johnson & Johnson is probably a little late. He also praised companies like Modena and Astrazeneca that are working on coVID-19 vaccines. Mr Trump said on September 18 that he expected to have enough coVID-19 vaccine ready for “every American” by April, with the first doses to be distributed as soon as they are approved later this year.
- Data showed the number of U.S. workers filing new claims for state unemployment benefits rose to 860,000 in the week to September 12, the third straight week the number fell below 1 million and the lowest since March 14. The agency’s commentary noted that claims for jobless benefits remained very high, indicating that unemployment from the outbreak was continuing. But the US economy has recovered more strongly than expected from the impact of coVID-19, with nearly half of the 22m people who lost their jobs back at work.
Until gold hits a low of $1,765, the slide may not end. The technical level to watch is whether $1897- $37 can be maintained. If the short-term decline lasts longer than expected, gold could fall to $1,765 or even $1,726.
Monday’s plunge was close to the 50-day moving average, an important technical indicator to watch, and a break below the 50-day moving average would likely take it to the $25 level, with another key support level below $24. In addition, a short-term rebound in the dollar is also a constraint. But if silver returns to the $26 level, it could test $28.
The dollar still needs to be closely watched in the afternoon, and if the dollar continues to strengthen significantly, silver will continue to fall. FXEmpire analyst Christopher Lewis said silver’s decline is a good opportunity to buy silver, and precious metals still hold their value.