Gold fell sideways after recovering from its worst two-week fall and is hovering around $1,862. The dollar rose on good news about the US coronavirus stimulus package, pushing down risk signals on COVID-19 and brexit stalemate, leading gold prices lower. That, combined with a slightly higher revision to U.S. GDP in the third quarter, has dented gold’s rally. Better-than-expected U.S. economic data will be a focus for gold investors looking ahead.
Gold was up 0.13 per cent at $1,861.90 as of 0853 Hong Kong time.
Fundamental Analysis: The U.S. dollar is celebrating support through its economic stimulus package
The passage of a new us stimulus package and a total spending budget of nearly $2.3tn suggests the world’s largest economy will have a good start to 2021. In addition, the U.S. electoral College has confirmed Democratic presidential candidate Joe Biden as the new president. The U.S. election is still uncertain, but the market has a clearer direction, which supports the dollar continued to celebrate in the run-up to Christmas. Weak acceptance of the renminbi in Europe and the UK would in turn steer markets towards the dollar. While leading market players have blamed risk aversion for the recent rise in the DOLLAR index, all of these factors have contributed to the dollar’s strength, which will clearly limit gold’s gains.
But with no progress on Brexit, EU policy makers have been unable to let go of the issue of Britain’s fishing industry, while suggesting that negotiations can continue. Fisheries and fair competition are the biggest obstacles to negotiations between the UK and the EU, and they will continue to move in this direction. With the confirmation of the variant COVID-19 virus in the UK, which is also likely to contribute to the emergence of a new COVID-19 pandemic, more countries are reducing travel and flights to the UK. The UK government warned of a shortage of COVID-19 tests before schools opened. British Prime Minister Boris Johnson has repeatedly warned that Britain must prepare for a no-deal brexit. The Brexit impasse is once again supporting gold, meaning a clearer picture may not be available until the December 31 deadline.
It’s not just Brexit, but new moves in sino-U.S. relations, with the U.S. imposing more visa restrictions on China. Secretary of State Mike Pompeo announced that the U.S. would impose additional visa restrictions on Chinese officials suspected of violating human rights and religious freedom. He noted that Chinese officials and their families could be targeted, stressing that the move showed Washington’s determination to hold Beijing accountable for its people’s growing repression and reiterated that the US would not welcome human rights violators into the country. The US has already cancelled the visas of more than 1,000 Chinese students and researchers suspected of spying, the latest restrictions in strained relations with Beijing. “Visa restrictions affect Chinese officials whom the U.S. government holds responsible for allegedly suppressing religion, spiritual practitioners, ethnic minorities, political dissidents, human rights defenders, journalists and so on,” he said. China’s authoritarian rulers impose strict restrictions on Chinese people’s freedom of speech, religion or belief, freedom of association and peaceful assembly. The United States has made it clear that such human rights violators are not welcome in our country.”
In the short term, FX Empire thinks the NEW STIMULUS package is far from sufficient, as it is too late to sustain the current rally. Clearly, the US needs to do more to keep unemployment and small businesses in business until the COVID-19 epidemic begins to subside. Along the way, the U.S. is likely to see another round of layoffs, which will increase the need for stimulus measures.
Fundamental analysis: US THIRD-QUARTER GDP growth revised slightly higher
The US domestic economy grew at a record pace in the third quarter but then slowed significantly due to the impact of COVID-19, the government said. In its estimate of THIRD-QUARTER GDP, the Commerce Department said US GDP rebounded at an annual rate of 33.4 per cent in the third quarter, slightly higher than the 33.1 per cent rate reported in November. But the US economy is still 3.5 per cent below its level at the end of 2019. Economists polled by Reuters had expected GDP to rebound at a 33.1 per cent annual rate in the third quarter without any revision.
Against that backdrop, Wall Street’s benchmark index ended mixed, with the S&P 500 falling for a third straight day and the 10-year Treasury yield falling 1.8 basis points in a sign of risk-averse sentiment. Going forward, U.S. unemployment claims data and durable goods orders combined with Michigan’s consumer confidence index will influence gold prices, but Brexit and COVID-19 remain the main risk catalysts.
The failure to break the $1,900 threshold has pushed gold to the intersection of its 21-day moving average and its uptrend since November 30, and it is now around $1,856.