International spot gold Thursday (September 10) continued to rebound, although the rise is still small, but has risen for the third day in a row, showing a slow upward trend, intraday as high as $1966.20 / ounce. Gold prices have been under pressure recently, largely on fears of a rebound in the dollar. But since TREASURIES have been low, gold has not come under much selling pressure. It is uncertain when the vaccine will actually be available, and investors believe central Banks and governments are ready to provide more stimulus and devalue their currencies in any case. Against this backdrop, gold remains supported by fundamentals.
Still, the dollar has sold off sharply in the past few months as liquidity fuelled risk appetite, the economy missed expectations because of a rise in coVID-19 cases, concerns about US fiscal policy, the Fed’s dovishness and speculative trading put pressure on the Fed’s open market operations. However, the dollar is likely to rebound ahead of the U.S. election due to increased downside risks, oversized short positions, relatively improving U.S. data and seasonal dollar bullishness. So gold’s upside resistance remains strong.
Meanwhile, the euro surged after the European Central Bank’s monetary policy meeting, especially when ECB President Christine Lagarde was speaking to the press, which put pressure on the dollar to retreat. “There is no need to overreact to the rise of the euro,” ECB President Christine Lagarde said, stressing that while the governing council discussed the euro’s direction, the central bank does not target exchange rates but aims to stabilize prices. Ms Lagarde also explained why the European Central Bank had kept interest rate policy unchanged. She said recent economic data showed a “strong rebound” in the eurozone economy, but activity levels were well below pre-outbreak levels. While remaining accommodative, the ECB raised its forecast for real GDP growth in 2020 to -8.0 per cent from -8.7 per cent in June. It also expects the eurozone economy to grow 5 per cent in 2021 and 3.2 per cent in 2022.
On the geopolitical front, China appears to be preparing to deploy thousands of its elite special forces to confront India in its volatile Himalayan border region. Meanwhile, the military build-up in China and India continues. Song Zhongping, a Hong Kong-based military expert, said that the deployment of elite units from different units for high-altitude air drop training was a clear signal that China was preparing for a potential military conflict. The Times of India also reported on September 10 that a senior Indian government official said On September 9 that India has further consolidated that forward position in response to China’s new military buildup and threatening actions. ‘If China wants a war, it will also pay a heavy price,’ the senior official said.
In addition, the US has revoked the visas of more than 1,000 Chinese nationals to suspend entry of students and researchers deemed to pose a “security risk”, according to a presidential announcement on May 29, a STATE Department spokesman said on Tuesday. Zhao Lijian, a spokesman for the Chinese Foreign Ministry, said: “The US should immediately stop using all kinds of excuses to restrict and suppress Chinese students in the US. We support Chinese students in protecting their legitimate rights and interests in accordance with the law. The Chinese side reserves the right to respond further to the matter.”
On a technical note, the daily gold chart lost its uptrend since March on Tuesday, but held on to key support around 1920 and regained it further on Wednesday, raising expectations of a return to the overall uptrend. If in line with expectations, the initial resistance above the short line in 1960, effective on the break will open pointing to 2000 space. In the short term, the initial support will be in the 1940s, and then it will fall to the 1920 and 1900 levels again.
Invesco investment strategist Talley Leger said with gold remaining above the key $1,900 an ounce, its long-term upward trend was unlikely to change any time soon.
On Thursday, the World Gold Council announced its August ETF holdings. While gold etfs have recorded inflows for September in a row, the pace of inflows in August was the lowest since 2020. Meanwhile, North America remains the main source of increased ETF holdings, accounting for two-thirds of total ETF inflows so far this year.
Overall, rising ETF holdings helped gold hit a record high in August, but as inflows slowed in the month, the metal edged lower in late August for the first time in five months.
In the long run, further falls in low global and real interest rates will continue to support gold, which has found solid support at $1,900 and peaked at $2,800 in inflation-adjusted terms. So it continues to support gold in the long run.