Spot gold continued to come under pressure below the $1,860 mark in early Asian trading on Thursday. Spot gold fell $35.76, or 1.88 per cent, to $1,863.05 an ounce, its lowest close in two months, after touching an intraday low of $1,905.16 an ounce and a high of $1,855.00.
The dollar’s strength in recent days triggered a sell-off in precious metals, while lower U.S. stocks triggered margin demand that also hit gold prices. In addition, the real yield on the 10-year Treasury note surged to its highest level in two months (still significantly negative) in overnight trading, putting pressure on gold.
The current battle to fill the bench has intensified the partisan rivalry and dimmed the prospects for a new fiscal stimulus package in Congress. Mr Trump said earlier this morning that he would present his nominee for the US Supreme Court at 5pm local time on Saturday.
In addition to the election and the stimulus bill, the Fed’s policy space and possible policy changes are also in focus, especially in recent days when several fed officials have been talking, including Colin Powell and the fed’s vice chairman overnight.
Mr. Powell stormed Capitol Hill On Wednesday, preparing testimony for Thursday’s Senate Banking Committee hearing that was nearly identical to his testimony on Wednesday and Tuesday. On questions, Mr Powell, in a change of tone from the previous day, dodged a number of questions from the committee, saying “we’ll have to go back and look at more Numbers” and “it’s not the Fed’s responsibility”.
On the economy, Mr. Powell said the path of the economy will depend on how well it can be contained. He said the economy had made significant progress, but there was still a lot of work to be done.
Federal Reserve Vice Chairman Larry Clarida also said the economy has made progress, but 11 million Americans are still out of work and we are still in the abyss. With unemployment high, the stakes for small businesses remain high. The US economy will return to pre-epidemic levels in three years, and the Fed’s baseline forecast is that the recovery will be faster than the 2008 crisis and additional fiscal policy needs to be considered. The Fed is expected to keep interest rates low for an extended period. Interest rates will not even be considered until real inflation reaches 2 per cent.
Mr. Evans, the misunderstood official who spoke of a ‘rate hike’ On Tuesday, made clear overnight that he doesn’t expect a rate hike any time soon, saying he doesn’t expect one until 2023, when inflation will hit 2% and then exceed it. Once the economic picture becomes clearer, the Fed may consider adjusting the pace and duration of its bond purchases.
Mr Evans says he is in the minority in arguing that inflation should rise to 2.5 per cent. If the Fed were to allow inflation to rise above 2.25 per cent rather than 2.5 per cent, it would take until 2026 to reach an average of 2 per cent. Interest rates will be kept on hold until full employment is achieved, inflation reaches 2 per cent and overshoot occurs. His idea of $1 trillion in financial aid may be a bit radical.
Mr. Rosengren also said weak economic growth could extend the Fed’s reach of its 2 percent inflation target, which would require interest rates to stay low for longer than expected. We will be lucky if inflation reaches 2 per cent within four years. Quantitative easing is helpful, but there is a limit to how much more it can do.
He said he was not as optimistic as other Fed forecasters that there would not be any new financial support in the short term, and that the biggest challenge was the inability of the US to make progress against coVID-19 and saw the risk of a surge in non-performing loans.
Some economic data pointed to stronger growth than expected, but the recovery was not broad-based, unsustainable and still fragile, Meester said. In terms of economic output and employment, the US has lost about six years of total output. Fiscal support for economic recovery will be much needed.
The geopolitical situation continues to be the focus of risk sentiment.
As India and China were locked in a standoff over the Line of Actual Control (LAC), a report by the US-BASED China Institute of Aerospace Research (CASI) said China had carried out several cyber attacks between 2007 and 2018, including a computer attack on Indian satellite communications in 2017. However, ISRO, while acknowledging the attacks, insisted that none of its systems had been compromised. China has several counter space technologies that can threaten space systems from geostationary orbit (GEO). India demonstrated its anti-satellite missile technology capability as early as 2019, which allows the country to “kill” enemy satellites.
The report goes on to say that the PLA continues to develop technology to “blind and deafen the enemy”. The report said China had the capability to conduct cyber attacks on ground stations with the intent of disrupting or hijacking systems to control satellites, including spacecraft.
On the U.S. -china front, U.S. Secretary of State Mike Pompeo warned U.S. state and local politicians on Wednesday to be wary of Chinese diplomats, who he said might try to woo them as part of China’s propaganda and spying efforts. He also called for more cooperation with Taiwan.
Speaking at the Wisconsin State Capitol, he said the State Department was reviewing the activities of the U.S.-China Friendship Association and the China Council for Promotion of Peace Unification because of suspicions they were trying to influence U.S. schools, business groups and local politicians. He said the two groups have ties to the United Front Work Department of the CPC Central Committee.
“You know, when Chinese diplomats approach you, it’s probably not in the spirit of cooperation or friendship,” Pompeo said, warning that the Communist Party’s “influence and espionage” had penetrated even to the city level. The federal government cannot regulate every such predatory and compulsive behavior. We need your help… Protecting The interests of the United States requires vigilance, and that vigilance begins with you, with all state legislators, regardless of party, “he said.
Mr Pompeo warned That Beijing was trying to avoid roadblocks erected by Washington at the federal level. He told state legislators in Madison, Wisconsin, that proposals from Chinese diplomats, Chinese nationals or “interested Americans with links to [the Chinese Communist Party]” were often part of a plot “in Beijing’s authoritarian form”.
1.Fxstreet analyst Matias Salord said spot gold remained under pressure amid a broad rally in the dollar and deteriorating sentiment. Despite a mixed initial REPORT from the U.S. Markit PMI, the dollar continued to strengthen in U.S. trading, with the DOLLAR index DXY climbing to its highest level since late July. Immediate support for gold in dollar terms is at $1860/62 (August low); The next strong support is at $1815/20. A rebound above $1880 would relieve short-term bearish pressure, while a rise above $1915 would improve the technical outlook.
Forexlive analyst Greg Michalowski said the next key target area for gold is the 100-day moving average of $1,842.46 and a 38.2 percent retraceof $1,837.13 since its March 2020 low. Silver remained above the 38.2 percent retracement of $22.90, while a dip below $22.90 was further bearish on its 100-day moving average of $21.64.
Charlie Morris, chief investment officer at ByteTree Asset Management, told Kitco News in an interview on the sidelines of the Denver Gold Forum that he now believes the fair value of gold is around $1,600. When gold hovered around $1,900, he explained, the market traded at a premium of about 15%. He added that valuations were in line with the fundamentals of driving precious metals higher. However, he said the market still had a lot of upside potential. In May, in a commentary for the London Bullion Market Association, Mr. Morris made the case for $7,000 over the next 10 years. Over the past few months, he said, he hasn’t seen anything that would change his long-term price target. He added that low-interest rates, combined with rising inflationary pressures, would continue to push gold higher.