Spot gold rose sharply after the Asian market opened on Monday, briefly breaching the $1,750 an ounce mark. The dollar index held near 100.40 at the start of the session. This week investors will once again welcome comments from fed chairman colin Powell, which are expected to guide the dollar and gold. Safe-haven buying is expected to continue to provide momentum for gold if U.S. housing data worsens this week. In addition, investors should keep an eye on the latest news on the sino-us trade situation this week.
The price of gold rose sharply at the start of the session, briefly breaking above 1,750
Spot gold opened higher in Asia on Monday, rising more than $10 to more than $1,750 an ounce and as high as $1,752.
Gold also continued last week’s strong performance. Gold jumped more than $40 last week as trade tensions between China and the United States intensified and economic data worsened.
U.S. President Donald trump said last Thursday that the novel coronavirus pandemic had cast a shadow over his January trade deal with China and suggested he might even sever ties with the country. Mr Trump has been blaming China, saying he was disappointed that it had failed to contain the coronavirus.
Tensions rose further on Friday when the trump administration announced it would block global chipmakers from exporting semiconductors to huawei technologies co.
In response, China said it was prepared to add us companies to its “list of unreliable entities”, which could include Apple, Cisco Systems and Qualcomm. China also said it may suspend purchases of Boeing aircraft.
Rodrigo Catril, the senior foreign exchange analyst at national Australia bank, said: “The market is in some form of wait and sees mode, particularly as to whether trade tensions between China and the United States will indeed escalate. “Trump has paid a lot of lip service to that, but the fact is that if he takes any meaningful punitive action, it will affect the markets, he has to take into account the fragile state of the U.S. economy, and it’s a delicate balance.”
Takeo Kamai, executive director at CLSA, said: “the trade war between China and the us was the biggest theme in the market last year. “If the conflict escalates beyond trade, it will be a big problem.”
Everett Millman, a specialist in precious metals at Gainesville, said rising tensions between China and the United States were “the biggest bad news” and gold prices tend to rise as a result.
FXTM market analyst Han Tan said it will only be a matter of time before gold reaches the $1,800 level.
“The coming months remain fraught with downside risks and the threat of a cooling of us-china relations, which will only further dampen global risk appetite in the context of this global pandemic,” Tan wrote in a report. The path of least resistance for gold is still upwards, so it is only a matter of time before it hits $1,800. There are still many potential positive catalysts for gold prices, including increased trade tensions between the us and China.”
Looking ahead, Millman said the u.s.-china issue will once again become a big issue. “I don’t see any improvement in tensions,” he said. If anything, the longer we have been dealing with coronavirus, the stronger that argument will be between China and the United States.”
As for this week’s trend, according to the weekly financial market survey released by FX168 on Saturday, analysts and traders are full of bullish sentiment on the outlook for gold this week. Among traders and analysts polled in the weekly financial market survey, gold bulls are up 75 per cent and bears 25 per cent.
Wall Street remains optimistic about gold prices in the coming week, according to Kitco’s weekly gold survey released Friday. Ten of 14 Wall Street professionals (71%) said they were bullish on gold’s prospects in the coming week. Two professionals each (14 per cent) held bearish and neutral expectations.
Adrian Day, chairman and chief executive of Adrian Day asset management, said: “there is no doubt that gold’s momentum is gaining as more and more investors see gold as the only option under the unlimited quantitative easing policy.”
Jim Wyckoff, senior technical analyst at Kitco, expects gold prices to rise. “The bulls had a very good week,” Wyckoff said. “the technical side has become more positive.”
Daniel Pavilonis, senior commodities broker at RJO Futures, said gold “should go higher this week”.
Can the dollar continue to rise as colin Powell returns this week?
The dollar index was hovering around 100.40 in early Asian trading on Monday. The dollar rose in a volatile week, ending the week higher for the second straight week, gaining 0.6 percent to end the week at 100.35.
Last week, as tensions between China and the United States intensified and investors worried about the possibility of a second wave of covid-19, safe-haven demand continued to drive the dollar higher, with the index breaking the 100 mark in a strong outbreak early in the week and then moving up and down around this psychologically important level for the rest of the week as it tried to gain a foothold.
“Three risks remain: a second wave of covid-19; The collateral damage of the blockade has delayed or slowed recovery; Tensions between China and the United States are rising.”
Last week’s assertion by federal reserve chairman colin Powell that negative interest rates were rejected also supported the dollar. Mr. Powell warned on Wednesday that weak economic growth and stagnant incomes would continue for “an extended period”, promising that the fed would use more tools as needed and calling for more fiscal spending to prevent the consequences of the coronavirus pandemic.
However, Mr Powell did not budge on the issue of negative interest rates, which is uppermost in the market’s mind. “The committee’s view on negative interest rates really hasn’t changed,” Mr Powell said in response to a reporter’s question at an event sponsored by the peterson institute for international economics. That’s not something we’re thinking about.”
Notably, U.S. President Donald trump has suddenly expressed support for the dollar. Mr. Trump said it was a good time for the dollar to strengthen. Mr. Trump, commenting on comments by the federal reserve chairman, colin Powell, said it would all be resolved and it would be a great thing to have a strong dollar.
“This is a great time for the dollar to strengthen because the whole world — you know, we’re paying zero interest,” Mr Trump said. It never happened. We pay very low. “Everybody wants to hold dollars because we have kept the dollar strong.”
The reason Mr Trump suggests holding the dollar is that he is confident the us economy will recover. He said the third quarter will be a transition period for the U.S. economy, which will do well in the fourth quarter. He thinks the economy will have its best year yet, with all the stimulus.
Mr Trump has repeatedly urged the fed to cut interest rates while complaining that the dollar is too strong. He has long wanted a weaker dollar, arguing that it would be better for the American economy.
In response, Alan Ruskin, chief international strategist at deutsche bank, said in a research note last Thursday that U.S. President Donald trump believes now is a good time to own a strong dollar, reflecting the unusual economic and financial environment fueled by covid-19.
This week, markets will focus on Powell’s testimony before the senate banking committee on Tuesday. In addition to Powell’s testimony, investors will receive minutes of the FOMC meeting on Wednesday.
On the broader economic front, data on April building permits and new home starts are due on Tuesday. Separately, on Thursday, U.S. jobless claims, the Philadelphia federal reserve’s manufacturing index, the manufacturing PMI and existing home sales will be released.
Analysts were split on the dollar’s outlook this week, according to the weekly financial market survey released by FX168 on Saturday.
On the dollar’s outlook this week, traders and analysts polled by FX168, the weekly financial market survey, saw the biggest decline at 37.5 per cent, with 25 per cent believing the dollar would consolidate and only 12.5 per cent bullish.
Atomic asset management (Hong Kong) co., LTD., founder and fund managers think on Monday, the dollar strong, last week highest closing line level is higher than the previous week, and fully show engulfing state, is a strong, no doubt, in the short term, the dollar will attack on further, suggested that every complete strategy, more than the monetary aspects will be under pressure.