On Thursday, the DOLLAR index edged lower to near 93.40. Spot gold was little changed at around $1,877 an ounce. On Wednesday, European and U.S. stock markets tumbled in tandem as the coVID-19 epidemic worsened, while the dollar was driven by safe-haven bids and gold fell more than $30 a day. On Thursday evening Beijing time, investors will be greeted with third-quarter U.S. GDP data that, if worse than expected, could add to concerns about the economic recovery in the United States, exacerbating the stock market rout, while gold could take another hit.
With no sign that any fiscal stimulus is on the way to ease the economic impact of coVID-19 in the U.S., investors are also buying the U.S. dollar as the haven of choice amid concerns about a rise in Novel Coronavirus cases in Europe and uncertainty over next week’s U.S. presidential election.
The dollar index.DXY closed up 0.45 percent at 93.45 on Wednesday, having hit an intraday high of 93.65. Spot gold closed down $30.66 at $1,876.83 an ounce on Wednesday, after hitting an intraday low of $1,869.23 an ounce.
Gold prices fell sharply on Wednesday and briefly came close to our main bearish target of $1,860.90 an ounce, according to Economies.com, cementing expectations that the bearish trend will continue. Once gold falls below $1,860.90 an ounce, it will continue to fall further, with short-term targets in the $1,800.00 area.
Vassili Serebriakov, a currency strategist at UBS in New York, said rising coVID-19 cases in Europe and around the world and the possibility of renewed government blockades had undermined risk appetite in the markets.
“The metal’s reliance on more stimulus is so high right now that the bears are in full control,” said Bob Haberkorn, senior market strategist at RJO Futures in New York. In general, gold has weakened against a stronger dollar due to a lack of stimulus and risk aversion ahead of the election.”
The rise in irus cases globally from novel Coronavirus is equally important, said David Meger, head of metal trading at High Ridge Futures. All of these factors contribute to the rise and fall in metal price volatility.
Ole Hansen, analyst at Saxo Bank, said: “Increased covid-19 uncertainty and the prospect of another European blockade have led to a fall in equities and a buying of the dollar. That hurts gold.”
“If gold falls below $1,885 an ounce, that could trigger more long liquidation and push the market lower,” Hansen said.
Covid-19 worsens, Germany and France declare “nationhood” on the same day
The global epidemic continues to grow, with nearly 480,000 new confirmed cases in a single day. Many European countries are still experiencing record growth. In the US, there were more than 500,000 new confirmed cases in a week. World real-time statistics show that the cumulative number of confirmed cases of COVID-19 worldwide has exceeded 44.74 million, and the cumulative number of deaths has exceeded 1.179 million. In the United States, there have been more than 911 million confirmed cases of COVID-19 and more than 233,000 deaths.
Germany and France announced restrictions on Wednesday that came close to the level of a total lockdown last spring as the number of COVID-19 deaths across Europe rose by almost 40 per cent in a week.
On the evening of October 28 local time, French President Emmanuel Macron announced that the whole of France, including overseas territories, will be closed down again from October 30 in response to the rapid rebound of COVID-19. Macron said the second outbreak was more difficult and had a higher death rate than the first. In the second epidemic, novel Coronavirus spread at an alarming rate, surpassing even the most pessimistic predictions before. If nothing is done about the outbreak, 400,000 people could die in France in the coming months.
Mr Macron said the new measures would remain in place until at least December 1, and the government would assess their effectiveness every 15 days to decide what to do next. Macron urged The French people to stay at home as much as possible and comply with anti-epidemic measures. It is reported that French Prime Minister Castaet will hold a press conference in the evening of the 29th to announce specific measures.
On October 28, data from the French health department showed that there were 36,437 new coVID-19 cases in France in 24 hours, with a total of 1235,132 confirmed cases, and the positive detection rate rose to 18.6%. Now there are 2145 severe cases, and 244 new deaths, with a total of 35,785 deaths.
German Chancellor Angela Merkel announced plans to close most public facilities, restaurants and entertainment venues and restrict individual travel across Germany from Nov. 2 to the end of November, after meeting with state governors. Although primary and secondary schools and kindergartens will remain open, other measures have reached the level of “city closures” implemented during the first wave of coVID-19 earlier this year, which German media called “DE facto closures”.
“We must act now,” ms Merkel said. Merkel said measures were needed to avoid a serious national health emergency in Germany. On October 28, the German CDC announced 14,964 new cases in a single day, the highest number since the outbreak of coVID-19 in Germany.
Michael Ryan, head of the WHO’s health emergency programme, said Wednesday that 46 per cent of the new confirmed cases and about a third of the new deaths last week were in the WHO’s European region, which is the “epicentre” of the global outbreak.
The European Commission on Wednesday proposed a series of new measures to tackle the COVID-19 outbreak in the EU, calling the new spike in infections on the continent “worrying”.
The surge in coVID-19 infections in Europe and the United States shook investors’ confidence in the economic recovery, and stock markets in Europe and the United States fell on Wednesday. Germany’s announcement of a new nationwide partial lockdown added to downward pressure on U.S. stocks, which had plunged more than 900 points.
By Wednesday’s close, the Dow Jones Industrial Average was down 942.40 points, or 3.43%, at 26,520.74. The S&P 500 ended down 119.50 points, or 3.53%, at 3,271.15, below its 100-day moving average. The Nasdaq Composite Index closed down 421.70 points, or 3.69%, at 11009.67.
In Europe, the Pan-European Stoxx 600 index closed down 2.95 percent and Germany’s DAX 30 index closed down 4.17 percent. The FTSE 100 closed down 2.55 per cent; France’s CAC 40 index closed down 3.37%.
Bob Haberkorn, senior commodity broker at RJO Futures, said gold could continue to fall if stock market losses intensify, testing the $1850-55 range and then the $1,825 range. “If there are more coronavirus blockades, we could see gold fall to $1,825,” he said.
Peter Hug, head of global trading at Kitco Metals, said: “We are in the midst of a second outbreak of COVID-19 which could undermine our current fragile economic recovery.” He added that any major problems at hospitals or new major blockades could trigger a market selloff similar to the one in March.
America’s GDP has taken a hit
Analysts say concerns about the economic recovery will make this week’s economic data particularly noteworthy. On Thursday, investors will be greeted by the most important economic data of the week, third-quarter GROSS domestic product, due at 20:30 Beijing time on Thursday.
Authoritative media surveys show that real GDP in the United States rose at an annualized rate of 32 percent in the third quarter, which would be the biggest increase since the government began tracking quarterly GDP data in 1947.
Notably, us real GDP contracted by 31.4% in the second quarter, the biggest drop on record.
Josh Bivens, research director at the Economic Policy Institute, said the second-quarter GDP data showed a sharp contraction, meaning that any growth in GDP in the third quarter was achieved in the face of a sharp contraction in the previous reading. So even a jump in THIRD-QUARTER U.S. GDP doesn’t mean the economy is out of the woods.
‘The recovery will be called into question as fears of a second wave grow and there is no new stimulus to support households in the U.S.,’ said James Knightley, chief international economist at ING.
“We expect the US economy to grow at a record annual rate of 34.5 per cent, helped by a rebound in consumer spending after stagnation and support for household incomes from higher unemployment benefits,” says Mr Knightley. More than 70% of unemployment benefit recipients earn more than they do when they work. Even after this impressive figure, it should be noted that economic output is still 3.2 percent lower than at the end of the fourth quarter of ’19.”
In addition to THE U.S. GDP data, investors will need to pay attention to U.S. jobless claims and pending home sales on Thursday.