Gold steadied on Thursday, hitting an intraday high of $1,555.10 an ounce. Concerns about an initial move back above $1 million and a stalled U.S. stimulus bill helped fuel a rally in risk aversion, helping gold’s lows rebound.
The latest data showed the number of AMERICANS filing new claims for jobless benefits rose to 1.106,000, compared with expectations of 920,000. Last week’s figure was also revised up 8,000 to 971,000 from 963,000. But continuing claims for state unemployment benefits fell to 14.844,000 from the previous week and were slightly below expectations of 15 million. What will need to be seen now is how investors interpret the data, and if the market believes the U.S. economic recovery will continue to strengthen, the dollar could get a boost, pushing down gold, which is priced in dollars and seen as a haven.
Dollar shorts were taking refuge from risk ahead of yesterday’s Release of the Fed minutes, with short covering being the initial driver of the dollar rally. The dollar continued to rally after the fed minutes were released, largely because they did not indicate the urgency for the Fed to take further action.
As a result, overall, the long-term bearish case for the dollar has not changed. The fed’s loose supply of dollars and the decline in dollar credit will weaken the demand for dollars, so the dollar will continue its five-month decline. Long – term dollar bears are bullish for gold.
Beyond that, gold traders face a battle between vaccines and the economy. As for the geopolitical risks in China and the United States, the market generally priced this part, but the continued outbreak deepened the downside risks in the economic outlook, while the clinical tests of Moderna and other vaccines in the third stage also maintained the optimistic confidence of the market, which temporarily put the long and short back to the situation of turbulence.
On the other hand, there was fresh news from the China-Us trade talks. “China and the United States have agreed to hold a phone call in the near future,” a spokesman for China’s Ministry of Commerce told a news conference. “Both sides have been trying to get warm with each other since January, trying to guess where things are going,” explains Nick Marro, a global trade specialist at the Economist Intelligence Unit. “There is a lot to talk about.” I believe that if the talks do take place, this will have a great impact on the market risk sentiment, may break the current volatile trend of gold.
On a technical level, gold’s daily chart pattern shows the metal retreating from a record high of 2075 on Aug. 7, briefly dipping near 1863 but still supported by upward trend lines since March 20, temporarily avoiding a further correction.
It is currently supported below the above trendline (the current cut is around 1886) and will test the low near 1863 before losing ground. However, once it falls below 1863 effectively, it will announce the periodic peak of the market with a high probability, and the market will not be excluded to fall to 1763 or even around 1690 later.
Richard Flynn, MANAGING director at Charles Schwab UK, said today’s rise in U.S. jobless claims to more than 1 million will disappoint markets. Investors had hoped that total jobless claims would continue to fall after last week’s “hopeful data”, but instead they have reversed course.
“The market remains convinced that the Fed will almost certainly not allow rates to rise at this time and that some kind of control cannot be ruled out,” said Saxo Bank analyst Ole Hansen. He added that the market would continue to buy on dips.