Spot gold remained under pressure in the Asian session on Monday, trading at around $1,860.80 an ounce. Meanwhile, spot silver fell below $22.85 an ounce, down 0.17% on the day. The DOLLAR index was little changed at around 94.52.
Global investors face a dilemma as key risk catalysts have yet to emerge and markets are sending mixed signals. While a surge in COVID-19 cases and political tensions inside and outside the US have challenged market sentiment, the strong recovery shown in The Chinese data has tempered pessimism. Data released at the weekend showed profits at Chinese industrial companies rose for a fourth consecutive month in August. “These Numbers bode well for the China growth story,” said Stephen Innes, global market strategist at AxiCorp.
Investors are now looking to the first US presidential debate on Tuesday as the election in early November begins to take on greater importance. “But few will try to bet on the outcome. At least they’ll wait until tomorrow’s debate on TV.” “Said Kyosuke Suzuki, head of foreign exchange at Societe Generale.
Fundamental positive factors
- According to real-time data of Worldometers, as of 0521 Beijing time on September 28, novel Coronavirus confirmed cases reached 33.26 million, with an additional 222,127 cases to 33269,168 cases, 1 million deaths and 3209 new cases to 1001,494 cases. In addition to 38 countries with more than 100,000 confirmed cases globally, Oman, the United Arab Emirates and Sweden have seen more than 90,000 confirmed cases. Novel Coronavirus confirmed cases in the United States amounted to 7.31 million, with an increase of 28,858 cases to 73,16419 cases, accounting for nearly one quarter of the total confirmed cases worldwide. The number of deaths reached 200,000, with 245 new cases reaching 209,422, accounting for nearly a quarter of the global total.
- The United States has imposed restrictions on exports to China’s largest chipmaker SMIC Because of “unacceptable risks” of equipment supplied to the chip maker that could be used for military purposes, Reuters, the New York Times and other media reported on Saturday. Smic said it had not received any formal notification of the restrictions and said it had no connection with the Chinese military. Smic said: “SMIC reiterates that it produces semiconductors and provides services only for civilian and commercial end users and end USES.” “Our company has no relationship with the Chinese military and does not manufacture products for any military end-users or end-uses.” In response, the Global Times commented that SMIC was also targeted by the US, whose dominant position in the global semiconductor supply chain was a “fundamental threat” to China. “It now seems that China needs to control all the r&d and production chains of the semiconductor industry and move away from dependence on the US. China needs to “prepare for a ‘new Long March'” and “be sure to overcome the technological obstacles of the United States” to fully unleash the creativity of the Chinese people.
Taiwan media reported on Sunday that another PLA fighter jets entered the airspace southwest of Taiwan on September 27, marking the 12th consecutive day for PLA fighters to enter the airspace. The frequent presence of PLA warplanes in the vicinity of Taiwan and their training exercises in recent days has aroused concern in Taiwan. Military aircraft did not appear to consider the airspace to be a Taiwan air Defense Identification Zone and did not take any notice of the announcement.
- On September 26, the US military once again sent military aircraft to the South China Sea for reconnaissance. The nearest distance was only 47.81 nautical miles from China. It is said to have set a new record for the closest close-in reconnaissance by a US military aircraft. “The strategic situational awareness” of the south China sea (SCS Probing Initiative) platform on twitter said: “the United States navy sent on September 26th, including EP – 3 e and P – 8 a spy plane over the south China sea, among them, the EP – 3 e scout recently China guangdong coastal only 47.81 miles.
The latest report in The Indian news media TimesNowNews on Sunday (September 27) said that the Indian army had deployed T-90 and T-72 tanks and BMP-2 infantry fighting vehicles near the Line of Actual Control in The Chumar-Demchok area of eastern Ladakh, which can operate at temperatures of minus 40 degrees Celsius. According to the report, India has deployed T-72 and T-90 heavy tanks, while China has deployed type 15 light tanks.
- The era of negative real yields on major sovereign debt is here to stay, while expectations of positive returns do not exist and are a distant dream, according to the latest Reuters poll of more than 100 fixed income strategists. More than three-quarters of strategists — 57 out of 75 — said sovereign bond yields were most likely to stay near or within range of their current levels, which are not far from this year’s lows and well below pre-outbreak yields. The 10-year Treasury yield is expected to rise 25 basis points in a year to 0.93 per cent, about half the expected average rate of inflation, meaning a negative real return over the next year. Nearly 80 per cent of strategists — 35 of 45 taking this view — said the Fed’s commitment to keep interest rates near zero for several years would keep yields on key government bonds “low”. Only about 20 per cent of respondents said this “will not stop share prices from rising”.
Fundamentals negative factors
A federal judge halted the Trump administration’s ban on downloading the video-sharing app TikTok hours before it was set to take effect on Sunday. The TikTok ban was scheduled to take effect at 11:59 p.m. Est on Sept. 27. Judge Carl Nichols of the District Court for the District of Washington, D.C., still had not ruled Sunday morning. He said he would decide on Sunday night whether the Trump administration’s national security concerns were urgent enough. He then granted a preliminary injunction sought by Bytedance to allow the app to continue to be used in the US app store. But the judge said the rejection did not include other Commerce Department restrictions set to take effect On November 12. The Commerce Department plans to ban the app altogether on November 12, and if the TikTok deal is not completed by then, the app will be unavailable.
- Last week, the DOLLAR index hit a two-month high of 94.745, its biggest weekly gain since early April. Data on dollar futures positions released on Friday pointed to further upside in the dollar’s recovery, with speculators holding large net short dollar positions. U.S. Commodity Futures Trading Commission data showed speculators held net short positions of $33.989 billion, up from $31.524 billion the previous week and close to the highest level in a decade. Separately, Reuters reported That Visco, governor of the Bank of Italy, said at an event in Trento: “The recent strength of the euro worries us because it puts further downward pressure on prices at a time when inflation is already low. The implications for monetary policy are clear: if downward pressure jeopardises our price stability target, we will have to intervene.” That has investors worried about a weaker euro. “With further unwinding of euro long positions, we need to be wary of euro weakness,” Makoto Noji, chief currency strategist at SMBC Nikko Securities, said in a note. We have no shortage of concerns in Europe, including the rise of coronavirus in France, ECB policymakers trying to push down the euro and Brexit.”
Gold: Gold is currently strongly supported at the 100-day SMA of $1847 an ounce, but buyers may wait until the September 21 low of $1882.
Silver: Spot silver has suffered another heavy fall, with $22.40 an ounce likely to be key short-term support, opening the door for further weakness toward the monthly low of $21.65 an ounce.