In the Asian session on Friday (December 4), the DOLLAR index was little changed, now at around 90.70. Spot gold continued to rally in the short term, with gold just closing in on $1,845 an ounce. Expectations of more stimulus from the United States have led to a recent rally in gold prices. Tensions between China and the US have also boosted risk aversion, helping gold prices as the Trump administration blacklists two more Chinese companies. On Friday night in Hong Kong, investors will welcome the U.S. non-farm payrolls report, which is expected to ignite the market again.
Gold prices rose Thursday as the dollar fell and investors looked to a breakthrough in talks ona U.S. novel Coronavirus bailout. Spot gold closed at $1,840.87 an ounce, up $10.43, or 0.57 percent. Gold continued to rise in Asian trading on Friday, hitting as high as $1, 844.76 an ounce.
Lawmakers failed to agree on a new rescue package, but there were signs that a $908 billion bipartisan bill was gaining support as a negotiating tool. House Speaker Nancy Pelosi and Senate Majority Leader Mitch McConnell began talks Thursday for the first time since at least the 2020 election.
Pelosi spokesman Tom Hamill said on Twitter that congressional leaders discussed their “shared commitment to complete a comprehensive spending bill and a New Cap relief program as soon as possible.” They have signalled they want to resolve both thorny issues before the last day of government funding, on December 11th.
Earlier Thursday, Mr. McConnell said he saw ‘hopeful signs’ that an economic stimulus deal could be reached by the end of the year.
Signs of progress in discussions on the U.S. Novel Coronavirus bailout bolstered the appeal of gold as a hedge against inflation.
Gold’s recent rally has also been driven by the weak DOLLAR, which has fallen to near three-year lows against an index that is up more than 20 per cent so far this year, according to FactSet data, while the dollar index is down nearly 6 per cent.
“Stimulus talk and further dollar weakness provide more support for gold,” Said StoneX analyst Rhona O’Connell in a note.
“The dollar has been falling, particularly against the euro, which has pushed gold higher,” said Carsten Menke, an analyst at Julius Baer. “This is not a typical safe-haven demand because there is a general optimism about the vaccine situation.”
XM Investment analyst Raffi Boyadjian said that while positive coronavirus news continued to weigh on gold, the weak dollar also helped the metal recover its recent losses.
Gold is trying to break through $1,838.10 an ounce, according to Economies.com, keeping the bullish scenario alive. Now wait for the gold price to rise further.
Gold is expected to test $18,50.00 an ounce, and once that level is breached, gold is expected to move up to its next major target of $18,70.00 an ounce, Economies.com said. A price above $1818.00 an ounce is a key condition for gold to continue its bullish trend.
Fawad Razaqzada, market analyst at ThinkMarkets, said the dollar index remained at recent lows as the euro rose, helping to support gold, although a slight rebound in Treasury yields was not expected to be much of a drag on the precious metal.
“According to our model, gold should be around $1,850 rather than below $1,800,” said Giovanni Staunovo, commodities analyst at UBS.
Trump has made new moves against Chinese companies
The Trump administration on Thursday added China’s largest chipmaker SMIC International (SMIC) and oil giant CNOOC to its blacklist of “military industry enterprises” owned by the Communist Party of China.
In addition, the Pentagon identified two other companies as owned or controlled by the Chinese military, including China Construction Technology Corp. and China International Engineering Consulting Co.
The potential move, first reported by Reuters on Sunday, brings the total number of blacklisted companies to 35. While the list initially drew no punishment, President Trump recently issued an executive order banning American investors from buying securities from blacklisted companies beginning at the end of next year.
At a press conference on November 30, Chinese Foreign Ministry spokesperson Hua Chunying said that we have expounded on China’s position on such issues many times. China is firmly opposed to politicizing cooperation with relevant Chinese enterprises and hopes that the US side will provide a fair, just and non-discriminatory environment for Chinese enterprises, instead of abusing the name of national security by imposing sanctions or discriminatory restrictions on Chinese enterprises and setting up obstacles and barriers for normal exchanges and cooperation between China and the US.
According to a draft list seen by Reuters, the Trump administration is about to announce that 89 Chinese aerospace and other companies will be placed on a list of companies “linked to military activities,” restricting their purchases of a range of U.S. products and technologies.
The companies on the list include Commercial Aircraft Corp of China Ltd, Aviation Industry Corporation of China and 10 related entities. The list, if released, could further exacerbate trade tensions between China and the United States and hurt American companies that sell China industries such as civil aviation parts.
According to Reuters, the Trump administration is about to announce that 89 Chinese companies are “military-related” and will restrict their purchases of a range of US products and technology. What is China’s comment?
Zhao lijian said that China firmly opposes the GROUNdless suppression of Chinese enterprises by the US side, and has repeatedly stated its solemn position on this. What the US has done seriously violates the principles of market competition and international economic and trade rules it has always flaunted, and will surely harm its national interests and its own image. Chinese companies have always been committed to operating in accordance with the law and strictly abide by the laws and regulations of other countries, including the United States, in their international operations. The US side should stop its erroneous practice of generalizing national security concepts and suppressing foreign companies.
U.S. President Donald Trump has stepped up his actions against China in recent months. On Nov 12, Trump signed an executive order banning Americans from investing in a range of Chinese companies that the White House believes support the Chinese military. The order bars U.S. companies and individuals from holding shares directly or through investment funds in companies the U.S. government believes can help the Development of the Chinese People’s Liberation Army.
“The People’s Republic of China is increasingly utilizing the capital resources of the United States and making possible the development and modernization of its military, intelligence and other security facilities,” Trump said in the order. The ban, which will take effect at 9:30 a.m. on January 11, 2021, targets 31 companies designated by the U.S. Department of Defense as “Communist Party military companies.” These include large state-owned aviation and construction companies, as well as technology and communications companies such as Inspur Group, Huawei and China Telecom.