In Asian trading on Friday, the DOLLAR index was little changed, while spot gold gave up gains earlier in the day after the price of gold briefly fell and lost ground to $1,950 an ounce after briefly breaking through the $1,960 an ounce barrier. Due to a weaker dollar and the situation of China and the United States remains tight, gold prices surged more than $35 on Thursday, the U.S. senate on Thursday proposed a bipartisan resolution condemning China’s use of “military aggression” to change the line of actual control with India, and called for a diplomatic solution, a move that may make the situation in China and the United States, China and India are further stress. However, White House economic advisers struck a more upbeat tone on trade between China and the US, which increased risk appetite and curbed the gold rally. U.S. retail sales figures for July are expected to trigger market volatility on Friday evening Beijing time.
Gold rallied from a near three-week low hit in the previous session on Thursday, rising as much as 2.5 per cent. Spot gold closed Thursday at $1953.02 an ounce, up $37.31, or 1.95 percent, after hitting an intraday high of $1966.00 an ounce.
The dollar fell on Thursday as the US Congress deadlocked over more stimulus measures to help tackle the coronavirus outbreak, sending gold sharply higher. The dollar index.DXY closed down 0.19 percent at 93.26 on Thursday, having hit an intraday low of 92.93.
Trump on Wednesday accused Democratic lawmakers of being reluctant to negotiate over the US coronavirus aid program. At the same time, Republican and Democratic negotiators traded accusations that the other side was responsible for the five-day failure to negotiate on the bailout bill.
“The impasse over the stimulus package is troubling,” said Amo Sahota, executive director at Klarity FX, a currency consultancy. What the government is trying to do now is put more band-aids on it, and that can’t last.”
Gold broke through $1,934.68 an ounce on Thursday and is close to our first waiting bullish target of $1967.90, according to Economies.com. This supports our bullish view in the coming days. Once gold crosses $1967.90 an ounce, the next target will be $2008.80, according to Economies.com. Maintaining gold prices above $1,934.68 an ounce is the first condition for continued bullish sentiment, Economies.com added.
“The overall consensus is that gold should move higher rather than lower, which is why we are seeing some bargain hunting,” said Carsten Menke, an analyst at Julius Baer. He added that market sentiment remained “very bullish”.
Investors will welcome U.S. retail sales data for July on Friday at 20:30 Beijing time. U.S. retail sales are expected to rise 2.1 percent in July, according to a media survey, well below the 7.5 percent rise in The previous month.
U.S. retail sales data are known as the “terror data” because they usually have a big impact on financial markets, and therefore are likely to have an impact on the direction of assets such as the dollar and gold.
After a sharp rebound in June, U.S. retail sales growth is expected to slow sharply in May, suggesting the economy still has a long and bumpy road to recovery.
In the longer term, most analysts see room for gold prices to rise further. Most of the main drivers of gold’s rise remain in place, including heavy central-bank money printing, low interest rates, rising geopolitical tensions and the looming US election.
Adding to the gloom, Fed policymakers warned that U.S. economic growth will slow until novel Coronavirus is under control.
James Steel, chief precious metals analyst at HSBC, said in a note: “The global economy continues to face a range of issues that are capable of supporting gold prices. This includes geopolitical risk and continued monetary and fiscal stimulus.”
Gold could go even higher, said Michael Cuggino, chief executive of the Permanent Portfolio Fund. In an interview, he said it was “not unreasonable” for gold to break through $4,000 an ounce. Gold could extend its gains as money is pumped into the U.S. economy, the dollar weakens and investors worry that inflation could return.
E.B. Tucker, director of Metalla Royalty and Streaming, sees gold continuing to rise to $2,500 an ounce by the end of the year. The current bull run is not out of control and gold will continue to advance at a steady pace. Tucker correctly predicted that gold would hit the $2,000 mark.
Edward Moya, senior market analyst at broker OANDA, said gold could rise to $2,300 by the end of the year.
“Despite the possibility of a short-term pullback, the medium – to long-term outlook for gold and other precious metals remains bullish amid a low interest rate environment and fiscal and monetary stimulus,” said Margaret Yang, strategist at DailyFx.
“The novel Coronavirus will not stop governments around the world from printing money anytime soon and gold will benefit from that,” said Bob Haberkorn, senior market strategist at RJO Futures. The next target price for gold is $2,090.”
Sino-us trade Negotiations
In addition to U.S. retail sales data, attention is now focused on a meeting between U.S. and Chinese officials scheduled for Saturday.
On Thursday, Reuters reported on Friday, White House economic adviser Scott Kudlow said the Trump administration was pleased with the progress China has made in fulfilling its promise to buy American goods under the first phase of the trade agreement, suggesting the deal will pass a preliminary review on Saturday.
China, Kudlow told reporters at the White House, “is really choosing to import our goods right now — which, by the way, is a huge boon to U.S. agriculture and the agricultural sector.”
On Saturday, U.S. Trade Representative Robert Lighthizer and Chinese Vice Premier Liu He will conduct a semiannual review of the trade agreement’s implementation by videoconference.
Six months ago, the deal defused a trade war that had hurt both countries and the global economy. The centrepiece of the first phase of the agreement is China’s commitment to buy at least $200bn more of US goods and services in 2020 and 2021, on top of purchases made in 2017.
While tensions between Washington and Beijing have escalated rapidly over the Novel Coronavirus pandemic, Hong Kong’s National Security law, U.S. sanctions against Chinese companies and officials, and human rights issues in Xinjiang, the first phase of the Trade agreement signed Jan. 15 has weathered the storm.
“We have significant differences with China on other issues, but we are working on the first phase of the trade agreement,” Kudlow said.
Amid the novel Coronavirus pandemic, China’s purchases of U.S. agricultural products, manufactured products, energy and services got off to a slow start, lagging far behind the promised increase of $77 billion this year and $200 billion over two years.
Mr. Kudlow’s comments echoed those made on Tuesday. Mr Kudlow said on Tuesday that the volume of Chinese purchases of US goods was a “very good number”, despite Beijing’s lag in meeting its obligations. Kudlow also denied that the first phase of the trade agreement would expire.
Asked if otherwise deteriorating relations between the world’s two largest economies could lead to trade agreements being tossed aside, Kudlow said: “No, no.” “One area we are engaging in is trade,” he told reporters at the White House. He is in good condition.”
Kudlow said China will continue to implement the agreement. “The evidence is that they are significantly increasing their purchases of U.S. goods,” Kudlow said. Kudlow also cited what he called “very good data,” especially in commodities.
In recent months, relations between China and the United States have deteriorated markedly, with both sides attacking each other ona broader range of issues, including the original origins of novel Coronavirus and the issue of Hong Kong autonomy.
U.S. President Donald Trump said On Monday that China had not fulfilled its promise to buy more American goods under the first phase of a trade deal signed in January, though he said purchases should increase next year. Mr. Trump said increasing purchases of American goods under trade agreements “will never pay for the loss of life in our country and around the world.”
Some observers say it is not in the U.S. interest to resume a tariff war with China, given that the U.S. economy has already been battered.