International spot gold fell to $1,725.07 an ounce on Tuesday morning, but the rally accelerated to 0.37 percent on the day and hit a high of $1,733.27 an ounce. It is now trading in the $1,732 area.
International spot gold rose as high as $1,735.19 an ounce at $1,734.36 and fell as low as $1,721.12 to close at $1,729.19, down $4.71 or 0.27 percent.
Also reflecting investor sentiment, the world’s largest Gold exchange-traded fund, SPDR Gold Trust holdings, rose 0.4 per cent to 1,116.71 tonnes on Friday.
Gold retreated in light holiday trading as some investors took profits, but lingering tensions with the U.S. and China and broad stimulus measures by governments around the world limited losses.
Afshin Nabavi, senior vice President at precious metals trader MKS SA, said that with ongoing global uncertainty, governments pumping money into their economies and interest rates falling, gold prices are likely to test new highs sooner.
Kyle Rodda, analyst at IG Markets, said: “I think exposure to equities and other risky assets may be supporting risk appetite and undermining the attractiveness of gold in the short term. It will be difficult for gold to break through $1,740 or $1,750 and that still seems to be a big problem.”
While gold remains firmly above $1,700, analysts say it will be difficult for the precious metal to break through resistance at $1,800 any time soon.
Bart Melek, head of global strategy at td securities in Toronto, said: “gold is currently around $1,730 an ounce, down from its previous 7 1/2-year high, and that’s part of the performance where we’re struggling to break above $1,800.”
Melek said relatively strong equity markets, a strong dollar and short-term deflation fears kept gold in a tight range.
At the same time, Melek thinks gold will continue to trade in the lower half of its recent trading range, with an upper track of $1,765 and a lower track of $1,705 an ounce. Gold is now more likely to trade at $1,715/1,750 an ounce.
Gold bulls are nervous or on the brink of a blowout as relations between the U.S. and China tighten
Recent tensions over trade tensions between China and the United States have made markets jittery, but gold bulls appear to have failed to let up, possibly due to thin trading on Monday, the holiday, but also reflecting caution.
On Friday (May 22), wang Chen, vice chairman of the standing committee of the 13th National People’s Congress, delivered a statement on the draft decision of the National People’s Congress on establishing and improving the legal system and enforcement mechanism for the maintenance of national security in the Hong Kong special administrative region to the third session of the 13th National People’s Congress.
Mr Trump last week responded to Hong Kong’s draft security law by saying that “no one knows yet” the details of China’s plans, but said: “if that happens, we will respond very strongly.” He didn’t elaborate. Mr Trump also said he would issue a full statement on the proposals “at an appropriate time”.
Us national security adviser Robert O ‘brien said on us media on May 24 that the us would impose sanctions on China if it approved legislation. He also said the legislation could lead to Hong Kong losing its status as a global financial center.
At the same time, China and the U.S. have sparred over Chinese companies’ access to advanced technology and criticism of China’s response to the covid-19 outbreak.
Critics say the threat of us sanctions against Hong Kong risks a repeat of last year’s damaging trade war between China and the us.
The Hong Kong special administrative region (hksar) government issued a statement on Tuesday morning in response to “remarks made by foreign politicians”, saying that every country has the right and responsibility to safeguard its national security and sovereignty, and it is obviously a sign of “double standards” and “hypocrisy” to suggest that China, which has sovereignty over Hong Kong, has no right to legislate for national security in Hong Kong.
Us presidential national security adviser Brian o ‘brien reportedly told reporters that the us would impose sanctions on China if the hong kong-related legislation was implemented.
Zhao lijian, a spokesman for China’s foreign ministry, said that if the us side is determined to harm China’s interests, China will take all necessary measures to resolutely respond and counter.
At a press conference on the same day of the third session of the 13th National People’s Congress, Chinese state councilor and foreign minister wang yi answered questions from Chinese and foreign journalists on China’s foreign policy and foreign relations.
A reporter asked, with china-us relations becoming increasingly tense and public opinion polls showing that the popularity of the American people has hit a record low, China and the United States will decouple from each other at an accelerated pace and even erupt into conflict. What is your view on that? Are you worried about further deterioration of china-us relations?
Wang yi said. “now watch, some political forces in the United States are kidnapping china-us relations, trying to china-us relations to the so-called” new cold war “, this kind of risk is back in history, will not only destroy people’s many years of cooperation between the two countries, will also hurt America’s own future development, endangering the stability and prosperity of the world. People of vision from all walks of life in both countries should stand up and stop it.”
Wang stressed that for the fundamental and long-term interests of the Chinese and us people, as well as the future and well-being of mankind, China and the us should and must find a way for countries with different social systems and cultural backgrounds to coexist peacefully and achieve mutual benefit and win-win results on this planet.
FOX Business host Stuart Varney said last week that he believes the cold war between the two countries has begun. He pointed to China’s move to enforce Hong Kong’s national security law.
A senior White House official says China plans to impose a national security law in Hong Kong that could lead to U.S. sanctions and further strain already strained relations between the world’s two largest economies.
“The biggest concern is tensions between the us and China,” said Takuya Kanda, general manager of research at Gaitame.com research institute in Tokyo. “things are bad already and could get worse, which is good for safe-haven assets.”
Overall, the international political situation is becoming more and more uncertain, and there is a sense of tension in the market. At present, the volatility of major assets in the financial market is not high, but the market seems to be on the verge of breaking out at any time. The next thing to watch out for is a sudden collective flight to safety as the international dispute intensifies. At that time, risky assets such as U.S. stocks, crude oil, Australian dollar, New Zealand dollar and so on May plunge collectively, while gold may usher in a boom moment.
Golden aftermarket outlook
Peter Grosskopf, chief executive of Sprott Inc., is very bullish on gold. He thinks gold will perform very strongly in the current risk-off environment, whether it’s deflation or inflation. Gold will be able to break through the 2011 record and reach $1,900 or even $2,000 an ounce by the end of the year.
‘the market is in a wait-and-see mode and there is limited upside and downside for gold,’ said Colin Cieszynski, chief market strategist at SIA Wealth Management.
Cieszynski is neutral on gold in the short term but bullish on the long term, predicting the next major resistance level at $1,820 an ounce in 2011-12.
Despite tensions between the U.S. and China, concerns about the economic recovery and ultra-loose monetary policy from central Banks around the world, gold prices appear to be showing signs of “fatigue” in the various factors that have been fueling the metal’s rally in recent months, Dailyfx wrote. From the technical analysis, the gold price fell and the probability of further decline is quite high.
“Not only are gold supported by low interest rates and economic stimulus, but tensions between the United States and China are also rising, which will keep gold on track for all-time highs,” said Phil Flynn, senior market analyst at Price Futures Group in New York.
Sean Lusk, co-head of commercial hedging at Walsh Trading, expects market participants to continue to buy gold on dips. Gold prices were supported by renewed tensions between the United States and China.
Adrian Day, chairman and chief executive of Adrian Day Asset Management in Toronto, said gold could fall back in the coming week before eventually rising again. As the us economy starts to restart, there will be initial optimism in equity markets, which could trigger a long-overdue pullback in gold prices. So expect gold prices to fall in the coming week. But because of the so-called ‘policies’ pursued by the world’s major central Banks, we remain fundamentally very bullish on gold in the long run.