In the Asian session on Tuesday, the DOLLAR index was little changed at around 90.90. Spot gold rallied in the short term, with bullion trading near $1,870 an ounce on expectations of fresh fiscal stimulus measures in the US. Geopolitical tensions have also triggered safe-haven buying, which has been bullish for gold prices. On December 7 local time, the US Treasury Department announced sanctions against 14 Chinese officials and the US State Department approved a $280 million arms sale to Taiwan, according to sources.
Gold prices rose sharply on Monday on expectations of new fiscal stimulus measures in the US. Spot gold closed at $1,862.27 an ounce, up to $23.56, or 1.28 percent, after hitting an intraday high of $1,868.51 an ounce. Gold extended gains in Asian trading on Tuesday, touching as high as $1,869.19 an ounce.
U.S. lawmakers are trying to hammer out a deal by passing a $908 billion rescue plan. Signs of progress in discussions on the U.S. Novel Coronavirus bailout will boost gold’s appeal as a hedge against inflation.
Donald Kudlow, the top White House economic adviser, said on Monday that Trump had not yet approved the bipartisan proposal but “could” sign off on a $908 billion plan. Kudlow said the “details” of the bill were important. “I think he may [agree], but it’s the policy details in the package that are important, and that’s the deciding factor,” he said.
In an appearance before the House Financial Services Committee last week, U.S. Treasury Secretary Steven Mnuchin stressed the need for a new bailout in the current economic climate.
Joe Manimbo, senior market analyst at Western Union Business Solutions, said: “The expectation is that the stimulus package will eventually be agreed with the vaccine, which is seen as putting the U.S. economic recovery on a faster and more sustainable track. It’s not good for the dollar.”
“The stimulus package has helped stabilize the gold market because injecting more money into the financial system will spark inflation,” said Jim Wyckoff, senior analyst at Kitco Metals.
Jeff Wright, executive vice president of GoldMining, said the prospect of a nearly $1 trillion STIMULUS package in the United States, which also represents more debt, will force the Federal Reserve to keep interest rates low and help gold prices rise.
COMEX Gold for February delivery closed Monday at $1,866.00 an ounce, up 1.41%. Chintan Karnani, chief market analyst at Insignia Consultants, noted that the closing price of Gold futures in February had crossed the 200-day moving average of $1,823.40 an ounce, helping to boost bullish sentiment for gold. The collapse of Brexit negotiations between Britain and the euro zone, coupled with a rising epidemic in the US, also supported gold prices on Monday.
Gold continued to rally strongly and managed to break through $1,838.10 and $1,850.00 levels, according to Economies.com, a leading financial website, opening the way for a continued bullish trend.
Gold briefly approached its target price of $1,870 an ounce on Monday, According to Economies.com. Waiting for further gains, gold is expected to extend its rally to $1900.00 / oz once it breaks through $1870.00 / oz. Above $1818.00 an ounce is the most important condition for gold to continue its bullish trend.
Peter Hug, head of trading at Kitco Metals Global, said reaching $2,000 by the end of the year was “not out of the question” if the stimulus package is approved.
Colin Cieszynski, chief market strategist at SIA Wealth Management in Singapore, is also bullish on gold in the short term as he believes more stimulus measures are on the horizon. “U.S. politicians appear to be under some pressure right now to reach a new spending/stimulus deal to avoid a government shutdown, which could boost gold prices in the coming days,” Cieszynski said.
On a technical level, gold’s breakout above $1,850 an ounce suggests further gains ahead, analysts said.
Td Securities analyst Ryan McKay said the dollar was still very weak and Friday’s weaker-than-expected U.S. jobs data had given the market more confidence that policy measures would continue to support the economy.
Charlie Nedoss, senior market strategist at LaSalle Futures Group in New York, expects the dollar to weaken further, which will give gold a further boost.
The gold market is likely to rise further in the short term as sentiment among Wall Street analysts and investors has shifted significantly, according to Kitco News’ Golden Weekly survey released Friday. Fourteen professional analysts responded to the survey last week. A total of 10 analysts (71%) expect gold prices to rise this week; Meanwhile, one analyst (7 per cent) expects gold prices to fall; Three analysts (21%) are neutral on gold.
Mocheck Analytics.com founder Michael Moor said he expects gold prices to rise to $1,890 an ounce, and then the reverse has begun to lose traction.
Frank Holmes, chief executive of US Global Investors, said a further 40 per cent rise in gold prices in 2021 was “very likely” and he expected prices to fluctuate between $2,200 and $2,600 an ounce.
“Over the past 21 years, two standard deviations have occurred frequently,” Holmes said. “Over the next 12 months, we could see gold fluctuating in the $400 to $800 range. This will hopefully raise the price from $2,200 to $2,600.”
The United States has approved a $280 million sale of telecommunications systems to Taiwan
On December 7, local time, the US Treasury Department announced sanctions against 14 officials of the National People’s Congress of China for “related to the disqualification of members of the Legislative Council of Hong Kong”.
The sanctions ban the 14 and their immediate families from traveling to the United States. Any assets the officials might have inside the United States would be blocked, and American individuals and companies would be barred from dealing with them.
The move is widely seen as an attempt by President Trump to solidify his tough policy toward China ahead of his Inauguration on January 20. Tensions between China and the US have helped boost safe-haven demand for gold.
Earlier, foreign media reported that the US was preparing to impose sanctions on at least 12 Chinese officials. On December 6, The Chinese Foreign Ministry responded: “If the United States persists in its course, China will continue to take resolute countermeasures to safeguard national sovereignty and security interests and safeguard the legitimate rights and interests of Chinese personnel.”
The U.S. Department of State has approved the sale of “field information and communications systems” to Taiwan, the Defense Security Cooperation Agency (DSCA) said On Monday. The sale, which is expected to take effect in about a month, is expected to cost about $280 million, the agency said. The sale is the first announced arms sale to Taiwan since the US election, the sixth this year and the 11th under The Trump administration. Taiwan’s foreign affairs ministry and defense ministry confirmed the news on Dec. 8.
According to a DSCA press release, the land area third generation communication system sold to Taiwan includes 154 access nodes, 24 relay systems, eight network management systems, and related personnel training and equipment maintenance. The package will provide a mobile and secure communications capability through the system that will help Taiwan achieve its goal of modernizing military communications capabilities, supporting mission and operational requirements, and allowing Taiwan to quickly deploy the equipment to its forces once it receives it.
DSCA said the sale of equipment and support would not change the regional military balance. It is in the national, economic, and security interests of the United States to support Taiwan’s continued efforts to modernize its armed forces and maintain reliable defense capabilities through this proposed arms package.
Rupert Hammond-Chambers, president of the US-Taiwan Business Council, said he welcomed the arms deal as a sign that Taiwan’s military is continuing to modernize its network infrastructure to provide troops with enhanced communications and operations, the United Daily News reported. At the same time, the TIMING of the arms sale will be welcomed by US and Taiwanese businessmen as a sign that Washington continues to support the modernisation needs of Taiwan’s legitimate forces during the transition.
The Freedom Times reported that in response to the arms sale, Taiwan’s defense department pointed out that the United States, following the previous three arms sales to Taiwan of five weapons and equipment, will continue to sell defensive weapons needed by Taiwan under the Taiwan Relations Act and the Six Guarantees to strengthen its information and communications capabilities. The Taiwan defense Department thanked the US for the decision.
For the both sides of the arms sale, the Chinese foreign ministry spokesman Zhao Lijian has made it clear that the us arms sales to Taiwan severely violates the one-china principle and the three sino-us joint communiques, especially the 817 gazette regulations, seriously interfered in China’s internal affairs, serious damage to China’s sovereignty and security interests, China is firmly opposed.
The spokesperson of the Chinese Ministry of National Defense also put forward a clear statement on the military purchase agreement between Taiwan and the US. The Chinese side strongly urges the US side to immediately cancel its arms sales plan to Taiwan, stop military contacts and arms sales to Taiwan, and prudently handle Taiwan-related issues so as to avoid serious consequences for china-us military relations and peace and stability across the Taiwan Straits.