International spot gold was trading at $1,719 an ounce in Asian morning trading on Friday (May 29). Gold rose in volatile trading to close at $1,717.91 an ounce in positive territory, snapping a three-session losing streak. Gold retreated to a low of $1,711 an ounce in the previous session before bouncing back. After hitting a high of $1,722.04 an ounce on the day, the pullback began again. It had earlier accelerated to a low of $1,712 an ounce and was down nearly $10 from the session high. Now gold prices have rebounded from their lows again, indicating the current market sentiment is extremely tangled, long – short – term both sides into a tug of war.
The international spot gold sub-market in the last trading session opened at $1708.88 / oz in the morning, rising as high as $1727.10 / oz, and reaching as low as $1706.59 / oz. It closed at $1718.00 / oz, up $9.12, or 0.53%.
COMEX gold for August delivery, meanwhile, closed 0.1 percent higher at $1,728.30 an ounce.
Reflecting sentiment, SPDR Gold Trust holdings, the world’s largest Gold exchange-traded fund, rose 0.2 per cent to 1,119.05 tonnes on Wednesday, its highest level in seven years. “ETF holdings are reaching new highs and investment demand in Asian markets is expected to outpace weaker physical buying. We continue to view gold risk as biased to the upside, “ANZ said in a note.
Gold’s rally in the last session was largely driven by a weaker dollar, while the market remained risk-averse. With growing uncertainty in u.s.-china relations and weak economic data, recovery from the outbreak may be harder than expected. With new geopolitical uncertainties on the rise and investors in a strong sense of risk aversion, it is no surprise that gold bulls are fighting back.
Is Donald trump’s big decision on the horizon?
On the afternoon of May 28, the third session of the 13th National People’s Congress adopted by a large vote the decision of the National People’s Congress on establishing and improving the legal system and enforcement mechanism for the maintenance of national security in the Hong Kong special administrative region. Subsequently, the standing committee of the National People’s Congress will formulate the Hong Kong national security law and include it in annex iii of the basic law, which will be promulgated and implemented by the hksar. Tensions are rising between China and the United States.
White House economic adviser frank kudlow said on Thursday that China had made a “huge mistake” in depriving Hong Kong of its freedoms and that they would be held accountable.
Chinese premier li keqiang says China has never rejected the cold war mentality and does not want to decouple its two economies. The two sides should work together and respect each other’s interests.
In addition, the trade war with China has wiped $1.7 trillion off the value of U.S. companies and reduced their investment growth by nearly 2 percentage points by the end of the year, according to a study by the vice President of the New York fed and others. American companies bear almost all the costs of higher tariffs on American imports.
The trump administration is reportedly seeking to punish China for introducing the Hong Kong national security law. US President Donald trump says he will hold a press conference on us-china relations on Friday local time.
According to media reports, trump will announce important actions at this press conference. Investors need to keep a close eye on any unexpected news, which could lead to wild market fluctuations.
At the same time, in addition to china-us relations, new geopolitical uncertainties are also affecting market nerves, and risk aversion may erupt again at any time due to the combination of factors. The latest news is that the United States is imposing massive sanctions on north Korea, targeting state-owned Banks and former government officials.
The us department of justice released a federal indictment on Thursday (May 28) accusing 2,828 north koreans and five Chinese of facilitating illegal payments for north Korea’s nuclear and missile programs, the Washington post reported, in the largest case of sanctions violations alleged by the us against north Korea.
The sanctions are said to target mainly state-owned Banks and former government officials who allegedly worked for the north’s foreign trade bank and set up more than 250 front companies and secret bank branches around the world to mask payments made through the U.S. financial system. Analysts say the charges against dozens of north Korean individuals, including former senior financial officials, mark a significant escalation in U.S. law enforcement. While none of the defendants are in custody, the indictment could limit their activities overseas.
This uncertainty, if compounded by tensions between China and the United States, could lead to an outbreak of panic and further uncertainty. In addition to the possibility of further gains in gold, the risk of an indiscriminate sell-off cannot be ruled out.
A series of mixed economic data from the United States remain
On the economic front, more than 2 million people still filed initial claims for state unemployment benefits last week, but the number of americans filing continuing jobless claims for the week ended May 16 fell for the first time since the outbreak of covid-19. Contracts for previously owned homes fell in April to the lowest level since records began in 2001, while orders for durable goods fell for the second month in a row. GDP was revised down by 5% in the first quarter.
The number of americans filing initial claims for state unemployment benefits fell to 2.123 million in the week ended May 23, the eighth straight week of declines, according to labor department data. Initial claims for state unemployment benefits fell to 2.10 million from 2.446 million. More than 40 million americans have lost their jobs in the past 10 weeks.
The report also showed the number of americans continuing to claim state unemployment benefits fell to 21.052 million in the week ended May 16 from 2.053 million.
The insured unemployment rate, the base ratio of people receiving unemployment benefits to the total labor force, fell sharply to 14.5 percent last week, down from 17.1 percent the previous week.
The White House is not expected to release a formal economic estimate of the impact of covid-19 on the United States this summer. The labor secretary says it is achievable to get the unemployment rate down to about 10 percent this year.
At the same time, the data released by the us Commerce Department showed that the real GDP in the first quarter was revised to -5.0%, expected -4.8%, and the previous value -4.8%.
According to the Atlanta fed’s GDPNow, GDP will fall by 41.9% in the second quarter, which would be the worst quarterly decline in U.S. history. That would tip the U.S. into outright recession, though most economists expect the economy to rebound in the second half of the year after the restrictions are lifted.
The congressional budget office forecasts that us GDP will fall by an annualised 38% in the second quarter, with 26 million more people out of work than at the end of 2019. The economy is expected to start recovering in the second half of 2020, and employment in the third quarter will improve significantly, as concerns about the outbreak subside and restrictions are eased across the country.
Michelle Meyer, chief economist at bank of America in New York, said the scale of the economic losses was “indescribable” and that there had never been a recession of this magnitude in modern history. At the beginning of April we were expecting a cumulative decline of a staggering 10 per cent in us GDP and a 30 per cent decline in the worst second quarter.
In addition, U.S. durable goods orders fell 17.2 percent in April, compared with an expected decline of 19.1 percent and a previous decline of 15.3 percent.
Fears of a U.S. recession also weighed on investors’ minds, giving gold a boost.
Golden aftermarket outlook
Fund managers and report authors Ronald Peter Stoeferle and Mark Valek of Incrementum AG noted Wednesday that the 14th annual report makes some pretty bold predictions for the gold market, predicting prices will approach at least $5,000 by 2030, and possibly even $9,000. Whether gold will approach $5,000 or $9,000 will depend on the global debt situation and inflation.
Daniel Pavilonis, senior commodities broker at RJO Futures, said most market watchers probably didn’t expect the market to recover so quickly. If the s&p 500 effectively moves above its 200-day moving average, it could mean there is a risk of gold falling to its 200-day moving average. For Comex gold in August, the 200-day moving average is around $1,582. “At this point, you might want to buy,” says Pavilonis. He said he was bullish about gold’s long-term prospects. “My view is that we are going to see higher gold prices as the printing presses get used a lot.”
In a report, citigroup said the risk of a temporary pullback to the mid-to-lower end of the $1,600 level appeared to be rising in the short term, adding that it remained “fully bullish on gold’s performance in the medium term, with prices expected to breach $2,000 over the next 12 months”.
A research note from bank of America asset management said gold remained in a bullish trend as the outlook for an economic recovery took time and fed officials were likely to keep policy loose. Gold prices were little volatile last week, but analysts at bank of America reiterated their view that gold remains in a bullish trend. “The fed’s money printing could lead to future inflation, which should support gold prices,” they said.