International spot gold was trading at $1,712 an ounce in Asian morning trading on Wednesday (May 27). Gold retreated sharply in the previous session, hitting a low of $1,708.70 an ounce, down more than 1 percent on the day. So far in the session, gold has temporarily rebounded from its lows, but the overall trend is still struggling.
International spot gold rose as high as $1,735.09 an ounce at $1,728.45 and fell as low as $1,708.32 to close at $1,710.36, down $18.83 or 1.09 percent.
COMEX June gold futures, meanwhile, closed down $29.90, or 1.7 percent, at $1,705.60 an ounce.
Gold prices fell on Tuesday when June options expired. George Gero, managing director at RBC Wealth Management, said traders were selling gold before the contract expired “to avoid a lot of margin calls as the options in those funds become futures contracts that require margin”.
TD Securities commodity strategists note that there is a ‘risk on’ tone in the market that is driving a reversal of safe-haven flows in gold. Gold has been unable to break out of the risk appetite.
“If gold falls below $1,700, it could open the door to $1,680,” said Lukman Otunuga, analyst at FXTM. However, trade woes, disappointing economic data and growth concerns are likely to ease the downward pressure.”
Ole Hansen, analyst at Saxo Bank, said: e are seeing us equities break through key levels and move up, which is putting some selling pressure on gold, which would otherwise be supported by recent geopolitical concerns related to Hong Kong.? There is no such key driver for gold at the moment, which basically increases the risk of a correction or reconsolidation.”
Dollar gold joins plunge global market sentiment completely changed?
The dollar and gold plunged in the previous session, while U.S. stocks and crude oil continued their rally as optimism about a potential novel coronavirus vaccine and a world economic restart helped investors shrug off fears of international tensions and weakened demand for safe-haven assets. Gold fell more than 1 percent to a low of $1,708.70 an ounce, while the dollar index.dxy fell 0.75 percent to hit 98.89, its lowest level since May 1.
Meanwhile, the s&p 500 briefly rose above 3, 000 for the first time since March 5 as investors’ appetite for risk intensified, sending global equities higher. The announcement came after Novavax, a us biotechnology company, became the latest to announce that it was launching human trials of its coronavirus vaccine candidate and said it had recruited the first participants.
Crude oil also surged further on Tuesday, with U.S. oil up more than 3 percent after gaining 13 percent and brent 8 percent in the previous week.
The s&p 500 has risen as much as 37.9 per cent since hitting a low on March 23, thanks to stimulus measures from the federal reserve and the government at a time when the us economy is suffering its biggest unemployment wave since the great depression of the 1930s.
“The reopening of the economy, coupled with positive news on novel coronavirus vaccines, has generally boosted sentiment,” Ronald Simpson, managing director of global currency analysis at Action Economics, said in a report.
In addition, U.S. consumer confidence rose slightly in May, suggesting the worst of the covid-19 recession may be over as the U.S. economy restarts, but it may take some time for the economy to pull out of the doldrums amid record unemployment. The dollar has traded in a narrow range since late march.
The conference board’s consumer confidence index jumped to 86.6 this month from 85.7 in April, according to data released on Tuesday. Economists polled by dow Jones were expecting a reading of 82.3 for may.
Meanwhile, new home sales in April also beat expectations, with data showing sales of new single-family homes rose 623,000 last month, beating expectations of 490,000.
“When you add all the news together, everyone is encouraged,” said jamie dimon, jpmorgan’s chief executive.
For now, the market seems to have a “buoyant” sense of recovery, the mood of the market trance changed in a short time, the risk assets U.S. crude oil launched a strong rebound, gold and the dollar diving hand in hand. But investors also need to be vigilant, as market sentiment is increasingly sensitive and fragile at a time when the global epidemic is not fully under control, the economic recovery is on thin ice, and relations between China and the United States are increasingly strained. Any new unexpected news may cause the market situation to change in a short time.
Golden aftermarket outlook
Citi commodity analysts expect gold to rise to $2,000 an ounce in the medium term. Analysts said they were bullish on gold as investor demand is expected to remain strong in an environment of low to negative global interest rates.
In its latest forecast, citi expects gold to average $1,715 an ounce in the second half of 2020. The bank expects gold to average $1,925 an ounce in 2021. While citi expects gold prices to rise next year, analysts don’t expect a major breakthrough.
“Technically, there is only room for further gains above $1,750,” Carlo Alberto De Casa, chief analyst at ActivTrades, said in a note. “a break below $1,725 would increase the likelihood of a repeat test at $1,700 and possibly further down to $1,671 to $1,675 an ounce.”
BubbaTrading.com chief market strategist Todd Horwitz wrote that gold was under pressure on Tuesday and threatened to break through key support levels. It seems that big sellers still exist. We remain long gold in anticipation of a rebound.