Golden week review: Gold volatility increases to squeeze out speculative water! Major risk near bullish sentiment stable!

On 21 August, August 17 solstice overview: this week gold jumpy, weeks once to break the $2000 mark, near the highest to 2015 levels, but encounter less than expected on Wednesday hit dovish federal reserve meeting minutes, gold prices tumbling to exceed $70, Friday is minimum down to 1910 levels, amplitude of more than $100 in a single week, fell for a second consecutive weeks. Still, the bullish sentiment on gold appears to be holding, largely because there are still a lot of uncertainties in the market, such as geopolitical risks, the U.S. election, an economic recovery from the pandemic and the timing of the U.S. stimulus package.

On the other hand, there is another reason why gold prices have become more volatile: the rush to safety has also led to an influx of gold speculators. Rising speculative sentiment has made gold a bit vulnerable after the $2,000 level, which can easily trigger profit taking if anything goes wrong. So further gains in gold prices may face some limits before the speculative water runs out.

Spot gold opened at $1945.44 an ounce this week, dropping $4.25, or 0.22 percent, to close at $1939.42, from $2,015 at the start of the week and $1911.00 at $1939.42.

Selling pressure in the precious metals market began to show on Wednesday after the minutes of the Federal Reserve’s July monetary policy meeting disappointed markets. The gold market failed to find any momentum after the Federal Reserve failed to provide any new guidance on interest rate expectations and said they saw no merit in capping Treasury yields.

Ole Hansen, head of commodity strategy at Saxo Bank, said the near-term direction of gold will be determined by the dollar. He added that dollar weakness was at unprecedented levels and a short-term correction was possible. He also said the minutes could provide some fresh impetus for dollar strength.

Afshin Nabavi, head of trading at MKS(Switzerland), said he was bullish on gold as the market appeared to find solid support around $1920. ‘The fundamental backdrop for gold hasn’t changed,’ he added. “We’re just seeing more two-way trading.”

At the same time, many analysts believe it would be healthy for gold to enter a period of consolidation and decline after breaching $2,000.

Geopolitical risk intensifies! Uncertainty mounts ahead of US election.

On Friday, U.S. Secretary of State Mike Pompeo spoke about a range of issues that remain between the United States and China, from strained trade relations to national security threats to the November presidential election.

Asked in an interview with CNBC whether relations between the world’s two largest economies could be restored, he said the Trump administration was open to dialogue with Beijing. However, he added that the US would maintain its tough stance in the interests of us national security.

Earlier this month, the trump administration announced it would remove “untrusted” Chinese tech apps such as TikTok and WeChat from the us app store. Pompeo detailed a new five-pronged “clean Network” effort aimed at containing potential national security risks.

“Because the parent company is based in China, apps like TikTok and WeChat pose a significant threat to the personal data of U.S. citizens, not to mention the Chinese communist party’s content censorship tools,” pompeo said at an August 5 press conference.

U.S. officials have long complained that China’s theft of intellectual property costs the U.S. economy billions of dollars in lost revenue, thousands of jobs and threatens national security. China insists it has not engaged in intellectual property theft.

Meanwhile, The US district attorney in New York said in a statement that Steve Bannon, a former political adviser to President Trump, was arrested along with three others in connection with the “We Build the Wall” project. The online donation program raised $25 million to build the southern US border wall, but Bannon was accused of using the money for personal expenses, the statement said. Postal Service agents reportedly arrested Bannon on a boat off the coast of Westbrook, Connecticut.

There is also news about the situation between China and the United States. U.S. lawmakers have introduced a bill that would change the way the federal government addresses Chinese leaders and ban the use of the word “President.”

Another surprise in the job market depends on the stimulus package

The number of americans filing new claims for state unemployment benefits unexpectedly rose to 1.16 million in the week ended August 15 from 971,000 the previous week, the Labor Department said on Thursday. Last week’s jobless claims fell below 1 million for the first time since March.

Daniel Zhao, senior economist at Glassdoor, said the US Labour market went into reverse last week as more people lost their jobs and sought government help.

Even so, the fourth economic rescue package is still in the “empty window” phase, leaving markets and the Fed in a “wait and see” dilemma.

House Of Representatives Democratic Speaker Nancy Pelosi is facing pressure from Congress to consider whether to replace pressure on Republicans with an agreement as soon as possible, according to several media reports. For now, Republicans are sticking to their pre-bipartisan spending cuts, which plan to spend smaller amounts in fewer areas.

Fed minutes focused on deflationary pressures hitting the hedging value of gold

The minutes show the Federal Reserve voted to keep short-term interest rates near zero on the grounds that the economy was not reaching pre-pandemic levels.

While Chairman Colin Powell and other Fed officials have said repeatedly that Banks and related institutions are generally in good shape, committee members told the meeting they are concerned about whether that will change if the virus continues to spread and “more adverse” scenarios for the future change.

On the other hand, members of the Federal Reserve believe the economy remains well below its pre-outbreak level. It would therefore keep interest rates low and view deflation as a major risk to price pressures. Fears of deflation were also a major reason for gold’s sharp retreat today, as it has a value as a hedge against inflation.

Market Outlook:

According to Kitco’s latest Weekly Gold Survey, price movements are likely to be volatile as strong resistance around $2,000 has created a two-way street and short-term sentiment continues to slide.

Fifteen Wall Street professionals took part in this week’s survey. There were seven bulls and seven bears, or 47%, respectively. One analyst (7%) expects prices to move sideways.

Among retail investors, Kitco’s online survey has the highest number of participants on record. However, confidence has fallen to its lowest level since the start of the year.

An online poll on Main Street received 2,830 votes. Of those, 1,596, or 56%, expect gold prices to rise next week. Another 702 (25%) expected prices to fall, while 532 (19%) were neutral.

Afshin Nabavi, head of trading at MKS(Switzerland), said he was bullish on gold as the market appeared to find solid support around $1920. ‘The fundamental backdrop for gold hasn’t changed,’ he added. “We’re just seeing more two-way trading.”

Lukman Otunuga, senior research analyst at FXTM, said he is short on gold because it lost the battle against the dollar this week. However, he added, the war is still going on.

“All eyes will be on the price reaction around $1,900. “If this level proves to be an unreliable support, gold could continue to fall before the bulls could re-enter the market.”

Adrian Day, chairman and CEO of Adrian Day Asset Management, was the only neutral voice in this week’s poll. ‘There’s going to be a correction, but the market continues to see unprecedented demand and bargain hunting,’ he said.

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