Spot gold moved back above the $1,950 mark in early Asian trading on Friday, before briefly rallying $5 to trade at $1,953.68 an ounce. In the previous session, spot gold fell $14.88, or 0.76 percent, to $1,943.81 an ounce from an intraday low of $1,932.36 and an intraday high of $1961.01 as hopes of more federal Reserve stimulus measures to support the coVID-19 hit economy evaporated. The dollar index.DXY also closed down 0.21 percent at 92.91, having hit an intraday high of 93.62 and a low of 92.87. Despite losing momentum in the last two sessions, gold is up 28 per cent so far this year because of near-zero global interest rates and the need to hedge against inflation.
The previous session, all three central Banks “hold fire.” The Federal Reserve first announced the interest rate decision, announced to keep the federal funds benchmark rate unchanged at 0% to 0.25%, in line with market expectations. The Fed has pledged to keep interest rates near zero and to keep them there until inflation continues to rise. After the Fed’s decision, the Bank of Japan released its interest rate decision, also announcing that it would keep its benchmark interest rate unchanged at -0.1%. It is expected that both short-term and long-term policy rates will remain at the current level or lower, which is in line with market expectations. At 7 PM Beijing time, the Bank of England said it would keep its benchmark interest rate unchanged at 0.1 percent and its total asset purchases unchanged at 745 billion pounds, in line with market expectations.
Analysts noted that the fed’s statement was dovish in content, with the notable change in the statement being that “the Committee seeks to achieve inflation of a moderate level above 2 per cent for an extended period of time”. But markets were disappointed that the Fed did not give more details of the policy change, such as how far it would be “moderate” or how long it would be “over time”. The Fed also gave no indication that it would increase stimulus further. Neither higher economic expectations nor a lack of further guidance on easy monetary policy are good for gold. The former depresses safe-haven demand for gold, while the latter benefits gDPbonds and the dollar, putting pressure on gold, which is denominated in dollars and has no fixed income. It appears that investors’ disappointment that the Fed didn’t signal more stimulus is turning into panic.
The geopolitical situation continues to be the focus of risk sentiment.
On Thursday afternoon, Keith Krach, under secretary of State for economic growth, energy and environmental affairs, arrived in Taiwan, becoming the second senior U.S. official to visit the island in 2020. Two YIN-8 anti-submarine aircraft of the People’s Liberation Army (PLA) Air Force entered Taiwan’s southwest Air Defense Identification Zone (ADIZ) on Wednesday, the Ministry of Defense and the Air Force command said on Wednesday. The PLA Air Force immediately broadcast and expelled the aircraft and deployed air forces to closely monitor the incident. According to the information provided by the Taiwan Air Force Command, the two Y-8 anti-submarine aircraft of the Communist Party of China (CPC) were concentrated in the southwest side of the Taiwan Air Defense Identification zone. The Taiwan Air Force kept track of the dynamics of the CPC aircraft and issued a verbal radio warning in coordination with the air force to expel them.
Senate Democrats on Thursday announced a plan to confront China, a clear signal from Washington that whoever wins the upcoming Presidential election in November is likely to come under intense bipartisan pressure on Congress to take a tough line on Beijing. The plan comes as relations between the us and China have sunk to their lowest point in years, with a rare bipartisan consensus that China poses a threat to global stability and US interests around the world. In July, Senate Republicans released their own mammoth bill against China. Senate Democrats plan on Thursday to present their most comprehensive strategy yet for confrontation and competition with China, rolling out sweeping legislation that would provide more than $350bn over 10 years to build US industrial capacity and challenge Beijing. The legislation, led by minority leader Chuck Schumer of New York and Sen. Bob Menendez of New Jersey, the top Democrat on the foreign relations committee, aims to strengthen U.S. manufacturing capacity and infrastructure to wean the country off China’s economy and make American companies more competitive.
China’s recent actions around the world are not that of a responsible international player but a “lawless bully,” David Stilwell, the top U.S. diplomat for East Asia said Thursday. In testimony prepared for the Senate Foreign Relations Committee hearing, Stilwell said the United States is not asking other countries to take sides, but rather to stand up against China’s “malicious” behavior and protect its sovereignty and economic interests. Stilwell also said that U.S. competition with China does not necessarily lead to conflict, and that the United States seeks to cooperate with China in areas where its interests are aligned, such as north Korea.
On the India-China situation, Hu Xijin, editor-in-chief of The Global Times, said on Twitter on Thursday that The number of Chinese casualties was “far less” than the 20 killed by Indian troops in a clash on the Himalayan border in June, contradicting the Indian defence minister’s statement. “No Chinese soldiers were captured by the Indian army, but the PLA captured many Indian soldiers that day,” he said.
In addition, the Indian Express newspaper reported that Shenzhen Zhenhua Data And Information Technology Co., a company with links to the Chinese government and Communist Party, had collected the personal data of tens of thousands of Indian politicians and celebrities and built a database to conduct a “hybrid war” against India. Senior sources said that information security and privacy issues raised by incidents such as Shenzhen Zhenhua’s collection of Indian citizens’ personal information were key to the Indian government’s decision to ban Chinese mobile apps and similar decisions.
Referring to reports that Zhenhua Data Technology Co LTD monitored tens of thousands of Indians and organizations, including Indian dignitaries, counsellors ji Rong, a spokesman for the Chinese Embassy in India, said the companies had publicly responded to the issue, making it clear that the reports were seriously inconsistent with the facts. I want to emphasize that Zhenhua is a private company and has nothing to do with the Chinese government. There are plenty of foreign companies engaged in similar business. The “presumption of guilt” based on rumors and rumors is pure lust for a stick.
UN Secretary-General Antonio Guterres said earlier this year that geopolitical tensions were at “the highest levels of this century” as the new decade began. He called on world leaders to ease the tension. Mr Guterres said the world had started the New Year in chaos. We live in dangerous times, he said, when instability is rising and even nuclear non-proliferation can no longer be taken for granted.
1.Kitco analyst Jim Wyckoff wrote that safe-haven gold and silver prices fell sharply in MIDDAY U.S. trading on Thursday, even as risk appetite among traders and investors eased and global stocks weakened. This seeming paradox has played out frequently over the past few months, confounding precious metals bulls. However, the situation has also prompted metal bulls to step in and buy on the dips to keep gold and silver up overall. Peter Hug, head of Kitco, said it was a “very good sign” that gold had consolidated between $1925 and $1975 for most of the two-week period. “The fact that the market is not as crazy as it was a month or six weeks ago and people are not selling now tells me that this market is getting ready for the next leg up,” Hug told Kitco News on Wednesday.
2.Ole Hansen, head of commodity strategy at Saxo Bank, said in a report published Thursday that gold could test the bottom of its current range of around $1,900. “Despite the Fed’s pledge to keep interest rates at rock-bottom levels for more than three years, the overall market reaction, such as the stock market decline and the dollar’s strength, has raised some concerns that the Fed’s toolbox has begun to empty and there are no longer surprises,” he said. With the Fed’s latest outlook stabilising the 10-year Treasury yield and real interest rates rising as inflation expectations fall, the gold market is in a tough spot, Hansen said. ‘The stronger dollar adds further to the current headwinds,’ he said. While gold prices have looked vulnerable in the near term, Hansen said he expects the market to maintain its long-term upward trend. He added that there was significant uncertainty in the market and that demand for gold would continue. He added that the continuing proliferation of viruses from novel Coronavirus in particular continued to weigh on economic growth.
- In a report released Tuesday, commodity analysts at CIBC raised their gold and silver forecasts for the rest of the year through 2021. Analysts say they expect gold to average around $1,925 in the third quarter. “Although we appear to be in the midst of a new round of QUANTITATIVE easing, there is significant uncertainty about the scale and duration of the global recession, with real interest rates remaining below 2 per cent in the short term,” analysts said. “Gold and silver prices have already reacted favourably to fundamentals, but if history repeats itself there may still be room for upside.” The bank also sees further dollar weakness as another important factor supporting gold and silver prices. “The dollar remains under pressure as coVID-19 is far from being contained and some pandemic stimulus measures are expected in the coming months. As the United States struggles with a heavy debt burden, high unemployment and the uncertainty of a continuing trade war, the dollar’s dominance may end for some time.”