On Monday (September 21) in the Asian session, spot gold range fluctuated around $1,953 an ounce, breaking through $1,955 an ounce at one point. Silver, meanwhile, edged up 0.37% to $26.86 an ounce. The DOLLAR index.DXY remained under pressure, trading near 92.82. Last week, spot gold swung between $1932-1973, closing at $1950.30 an ounce, up 0.53 per cent for the week. Spot silver closed last week at $26.76 an ounce, up 0.17% for the week. The dollar index.DXY swung broadly last week to close at 93.00, down 0.29 percent last week.
For gold bulls, although last week didn’t see a major breakout, the week was still full of opportunities. Among them, following two big much factor, it is long the biggest rely on.
First, the market’s bullish sentiment towards gold has been improving for several weeks. Speculative long positions in COMEX gold futures surged 11,339 lots to 324,512 lots in the week ended Sept. 15, according to the CFTC Positions Report. Even gold etfs, where inflows have been weak recently, reversed course last week. Holdings data showed the SPDR Gold Trust, the world’s largest Gold exchange-traded fund (ETF) known as SPDR, increased its holdings by 12.85 tonnes on September 19, the largest increase in nearly three months, after weeks of sell-offs.
Second, from a technical point of view, gold prices also appeared a breakthrough opportunity. Although gold’s rally slowed last week because the Fed did not provide enough stimulus, it is expected to remain sideways this week, but could still regain its upward trend if it breaks through key levels, said Analyst Rajan Dhall.
“Gold needs to focus on resistance at $1973.64 this week. Any break above that and gold will reopen an upward path to $2,000.”
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. Also, investors will need to keep an eye on Powell and Mnuchin’s Senate testimony, where they are likely to talk about the need for fiscal stimulus.
From Wednesday to Thursday, Federal Reserve Chairman Colin Powell will appear before a House panel to testify on the Novel Coronavirus crisis, and U.S. Treasury Secretary Timothy Mnuchin will also appear at a hearing on The 22nd. On The same day, Powell and Mnuchin will again appear before the Senate Finance Committee to report on the quarterly implementation of the COVID-19 Assistance, Relief and Economic Security Act (CARES Act).
The two leaders in charge, fiscal and monetary, could come together to determine whether market sentiment is skewed towards risk or risk aversion. In previous interviews, Mr Powell has stressed the need for sustained monetary support and has increasingly stressed fiscal support. He said the role of monetary policy was limited and called on the federal government to step in.
Fundamentals positive factors:
According to world real-time statistics, as of 7:31 PM, September 21, the total number of confirmed cases of COVID-19 worldwide has exceeded 31.21 million, reaching 31,218,129, and the total number of deaths has exceeded 964,000, reaching 964,727. The United States has the highest cumulative number of confirmed COVID-19 cases in the world, exceeding 7 million to 7,896. The cumulative number of deaths has exceeded 204,000, reaching 204,115.
- According to the latest reports from Indian media such as Opindia.com and India Today, Indian troops have taken up six new heights along the LAC in eastern Ladakh in the border stand-off with China. The new uplands include Rachana La, Rezang La, Mokhpari, Gurung Hill, Magar Hill and the largest peak on the Finger 4 ridge. This puts the Indian army in a better position than the Chinese army in the difficult mountain areas. India Today reported that the peaks were the latest strategic locations on the India-China border to be controlled by The Indian army in September.
- According to a Taiwanese media report on Sunday (September 20), two IDF fighter jets of the Taiwan Army were sandwiched by 6 FIGHTER jets of the PEOPLE’s Liberation Army (PLA) while carrying out the eviction mission on September 19. The IDF fighters belong to the 3rd Wing of the Taiwan Air Force and are based at The Qingquangang base in northern Taiwan. The IDF fighters were sandwiched by six PLA jets at an altitude of 5, 000 meters after they were scrambled Monday in response to the PLA’s actions near the so-called “Middle Line” of the Strait. According to Taiwanese media, the six fighter jets dispatched by the PLA are all J-16 fighters.
Fundamentals negative factors:
- On Monday, India and China are scheduled to hold a force Commander level meeting in Moldo on the Chinese side of the Line of Actual Control (LAC) to discuss the border deadlock. This will be the sixth dialogue on the issue. In the first five meetings, the military officers failed to break the deadlock. Monday’s meeting will be the first since the secret operation at midnight on Aug. 29. Earlier, Indian troops moved quickly and occupied key highlands to prevent the People’s Liberation Army (PLA) from seizing Indian territory on the south bank of The Lake. It will be the first meeting since the two foreign ministers agreed on a five-point road map to promote disengagement and ease tensions. Foreign Minister S Jaishankar and Chinese Foreign Minister Wang Yi discussed the five-point plan on the sidelines of a meeting of the Shanghai Cooperation Organization (SCO) in Moscow earlier this month.
Last week, Republicans and Democrats reached another deadlock over a proposed $1.52 trillion new fiscal stimulus package. Since passing a $3 trillion rescue package in May, Republicans have been hoping to reduce the size of the second round. But the market’s reaction to the bill’s difficult delivery has been surprisingly muted, perhaps a sign that some degree of bipartisan intransigence has been priced in ahead of time. But the good news is that Democrats and Republicans reached a deal over the weekend on a temporary spending bill to avoid a government shutdown in the new fiscal year.
Gold continued its rally on Friday, briefly moving towards its first waiting target of $1967.90 an ounce, Economies.com said in an article. It is now waiting for gold prices to rise further in the coming days. If gold breaks through $1967.90, the next target will be $2008.80. Maintaining gold above $1,934.86 is important to continue the expected rally.
Spot silver is biased down on the day, with RSI technical indicators showing a further downward trend, if below $27.1, looking towards $26.50.