The dollar index was little changed on Monday, trading near 99.80. Spot gold was modestly lower at around $1,728 an ounce. Investors are bracing for a slew of central bankers’ speeches this week, with federal reserve chairman colin Powell and European central bank President Christine lagarde in the spotlight. In terms of economic data, the U.S. will release a large number of key data this week, among which the U.S. GDP revision for the first quarter will be particularly noteworthy. In addition to central bank speeches and economic data, investors will be watching for the latest geopolitical developments this week, which could give gold a boost if tensions between China and the United States rise further, with gold bulls eyeing $1,800 an ounce in the near term.
Both colin Powell and Christine lagarde will appear
Fed chairman colin Powell will discuss the economy via video conference at 23:00 Friday Beijing time.
In his economic testimony on Tuesday, Mr Powell reiterated that the fed would use “a variety of tools to support the economy”. Mr Powell also warned of high uncertainty and significant downside risks to the economic outlook and called on policymakers to take more fiscal measures to pull the economy out of the crisis.
Mr Powell also expressed concern about the lasting damage to the economy caused by the recession, but stressed that negative interest rates were not currently on the table.
It’s important to note that Powell, in a recent speech, also noted that current data point to the success of social segregation, but predicted that economic indicators for the second quarter will be pretty bad.
Powell had warned of further deterioration in the job market and fears of rising unemployment, and his rediscussion of the economy on Friday is expected to release more details.
In addition to Mr. Powell, there are a number of key central bankers on the scene this week.
Bank of Canada governor Paul poetz will speak at 03:00 Tuesday Beijing time. Bank of Canada governor Paul poetz and senior deputy governor James Wilkins will speak before the senate banking committee at 05:00 Wednesday Beijing time.
At 01:00 GMT on Wednesday, Minneapolis fed President Jeffrey kashkari will participate in an online conference titled “living in the world of covid-19: discussions with leading health and economic experts.”
At 05:00 GMT on Wednesday, the federal reserve bank of New Zealand will release its financial stability report. New Zealand federal reserve bank President Paul ORR will hold a press conference on the financial stability report at 0700 GMT on Wednesday.
European central bank President Christine lagarde is due to speak at 15:30 GMT on Wednesday. Ms lagarde has said recently that the ECB is ready to increase its asset purchases if necessary.
St. Louis federal reserve bank President James bullard will speak on the outbreak and the economy at 00:30 GMT on Thursday, ahead of the release of the federal reserve’s beige book on economic conditions at 02:00 GMT on Thursday.
New York federal reserve bank President William Williams will take part in a live discussion on the fed’s response to the covid-19 outbreak at 23:00 Thursday Beijing time.
The U.S. GDP came with a lot of key data
The us will release a slew of key data this week, with the first quarter GDP revision the most closely watched.
At 20:30 Thursday, investors will be greeted by a revision to us first-quarter real gross domestic product. Media surveys show real U.S. GDP in the first quarter is expected to decline at an annualized rate of 4.8 percent, the same decline as the initial estimate.
Analysts said a bigger-than-expected drop in U.S. gross domestic product could depress the dollar, while safe-haven buying sparked by U.S. economic worries could also support gold prices.
“We expect the GDP figure to be slightly below the initial 4.8 per cent decline,” ing analysts wrote in a note on Friday. “the market will continue to expect new stimulus measures in the us, which could take several weeks.”
The Commerce Department reported on April 29 that real GDP fell at an annualized rate of 4.8% in the first quarter, the biggest quarterly decline since 2009.
It was the first negative reading since GDP fell 1.1 per cent in the first quarter of 2014, and the lowest since it fell 8.4 per cent in the fourth quarter of 2008, at the height of the financial crisis.
The drop in GDP reflected a sharp drop in economic activity in the last two weeks of march, when millions of americans sought unemployment benefits.
In addition to the GDP data on Thursday, this week the United States needs to focus on data including the United States on Tuesday April sales of new homes in May, conference board consumer confidence index and Dallas fed manufacturing index may, Thursday, April orders for durable goods, consumer price index in the first quarter, initial jobless claims last week and April NAR seasonally adjusted index of pending home sales, and may at the university of Michigan consumer confidence index on Friday.
Geopolitical tensions could help gold reach the 1,800 mark
International spot gold started pulling back after hitting a more than seven-year high of $1,764.80 an ounce last Monday and continued to settle in the $1,710 – $50 area for most of the week.
Analysts said gold was being curtailed by the prospect of a gradual economic recovery and a return to risk appetite, supported by trade tensions, a low interest rate environment and expectations of more stimulus.
Gold remains stuck between key trend levels ($1,725.90 / oz support and $1,743.00 / oz resistance) and will therefore maintain a neutral stance on gold until it either falls below that support or breaks through it, according to an article on Economies.com.
A word of caution, said Economies.com, is that if gold were to fall below $1,725.90 an ounce, that would put bearish pressure on the metal, which is mainly targeting the $1,691.10 level. On the other hand, once gold overcomes $1,743.00 / oz resistance, this will reactivate the main bullish trend scenario, with the next major target at $1810.00 / oz.
Gold bulls are focusing on rising geopolitical tensions that could eventually help gold break above $1,800 an ounce.
The third session of the 13th National People’s Congress (NPC) will deliberate on the draft decision of the NPC on establishing a sound legal system and enforcement mechanism for the Hong Kong special administrative region to safeguard national security, said zhang yesui, spokesman for the session.
US President Donald trump has said the us will strongly oppose China’s passage of legislation in Hong Kong. Chinese foreign ministry spokesman zhao lijian said at a press conference on Tuesday that Hong Kong affairs are China’s internal affairs and any outside interference is opposed.
“This could lead to new protests in Hong Kong and further deterioration of us-china relations,” said Cartsen Fritsch, analyst at commerzbank.
On May 23, the us department of commerce announced that it would add a total of 33 Chinese companies and institutions, including 360 and cloud technology, to its “entity list”. After these enterprises and departments are included in the entity list, the U.S. government may restrict the export, import, or re-export of these entities under the export administration regulations. This means that companies on the list cannot have any business dealings with the United States.
Sean Lusk, co-head of institutional commercial hedging at Walsh Trading, expects investors to continue to buy on dips. Some market watchers said renewed tensions between China and the us were supporting gold prices.
Adrian Day, chairman and chief executive of Adrian Day Asset Management in Toronto, said gold could fall before rising this week. “As the U.S. economy starts to restart, there will be some initial optimism in equity markets, which could trigger a long overdue pullback in gold prices, but we remain fundamentally very bullish on gold due to the so-called ‘policies’ pursued by major central Banks around the world,” Day explained.
“Investors could see history repeating itself as china-centred political tensions reignite fears of another trade war,” said strategists at ING.
Charlie Nedoss, senior market strategist at LaSalle Futures Group in Chicago, said gold prices could rise as soon as panic sets in.
“As China becomes more domestically focused and the situation in Hong Kong develops, the dynamics of the gold market are shifting from an inflationary trade to a geopolitical and economic panic trade,” Nedoss said. I expect gold prices to move higher this week.”
Colin Cieszynski, the chief market strategist at IA Wealth Management, said it was also important to watch closely how geopolitical tensions affect the overall global recovery and whether they might “force central Banks to do more.”