On Tuesday (September 1) in the Asian session, the DOLLAR accelerated to fall to the 92 level, spot gold continued to pull up just hit $1985, while silver also continued to expand to about 2%.
Yesterday, the dollar renewed a two-year low to below 92 and the US index extended its losses to as low as 91.91 in Intraday Asian trading. Earlier, the Fed adjusted its inflation policy.
China’s latest caixin services PMI came in better than expected. The Caixin manufacturing PMI rose to 53.1 in August, the highest since February 2011.
Wang Zhe, a senior economist at Caixin Think tank, said the post-COVID-19 economic recovery is still going on, with both supply and demand moving in the same direction and overseas demand also strengthening. Employment is still the top priority. The expansion of employment depends on the long-term improvement of economic prosperity, and the support of macro policies is indispensable. Especially when there are still many uncertainties in domestic and international economic operation, relevant policies should not be tightened significantly.
Investors are adjusting to Thursday’s remarks by Federal Reserve Chairman Colin Powell. In his speech, Mr Powell outlined a shift in policy that markets believe could lead to inflation being slightly higher than it would have been otherwise for some time and interest rates staying low for longer.
“Dollar bears have been the latest winners in the wake of the Fed’s inflation policy change, which should keep U.S. interest rates near zero for the foreseeable future and keep [the dollar] under pressure,” wrote analysts at Action Economics.
Net dollar short positions held by speculators rose to $33.7 billion in the week ended August 25 from $31.6 billion the week before, according to Data from the Chicago International Money Market. This underlines the continuing loss of confidence in the dollar.
“I think what we are seeing is a continuation of the downward momentum in the dollar that started in the second quarter. The Fed’s message last week only reinforced that, “said Dan Daniel Katzive, head of currency strategy for North America at BNP Paribas.
Looking ahead, Pimco says the dollar is likely to fall in all but the most extreme cyclical scenarios. “We believe that unprecedented levels of fiscal support, the expected commitment of the Federal Reserve to compensate for past overshooting of inflation targets, and an uneven RECOVERY in the US could lead to a depreciating dollar bias in all but the most extreme cyclical scenarios.”
Spot gold bulls took advantage of the dollar’s continued retreat, pushing the price of the precious metal above $1980 in Asian trading on Tuesday, its highest level since August 19.
Jeffrey Sica, founder of Circle Alternative Investments, said: “The weaker dollar and the expectation of further dollar weakness has led to some modest gains [in gold].”
Afshin Nabavi, head of trading at MKS, said gold’s holding at $1,900 an ounce was a very, very bullish sign. And with the dollar unable to break through significant resistance levels, gold is on track to break through $2,000 an ounce.
Edward Meir, an analyst at ED&F Man Capital Markets, said the gold market is likely to retest its highs, with nothing changing the positive fundamentals.
Kitco analyst Peter Hug said the gold market has been very volatile over the past few weeks and that will not change for the time being. For the week ahead, Hug said it was optimistic gold would test $2,000 an ounce and once it was back above the key psychological level, the market would see the next push.
Charlie Nedoss, senior market strategist at LaSalle Futures Group in New York, said the focus this week was on the August nonfarm data. Gold is on track to break $2,000 an ounce, but the market won’t get excited again until it breaks $2010.
On the daily chart, the dollar index.DXY, under further pressure to break a two-year low after two days of losses, is trading around 91.95. Daily chart MACD red kinetic energy column gradually weakened and nearly disappeared, KDJ stochastic index downward close to oversold level, indicating a sharp decline in short-term bullish momentum, or further downward.
On a 4-hour chart, the DOLLAR index has fallen from all its moving averages as it forms falling highs and lows. MACD green momentum column expansion remained stable, and KDJ stochastic hit the oversold level below, indicating strong bearish momentum for the dollar, short term or continued volatility.
On daily charts, gold rose further in the intraday after two days of gains, breaking above $1,980. Daily chart MACD green momentum column gradually weakened, KDJ random index sharply above the 50 level, indicating that gold bearish momentum has slowed, is expected to further rebound.
On the 4-hour chart, gold prices continue the momentum of previous volatility higher, and has now reached all moving levels. The MACD red momentum column was largely stable, while the KDJ random index hit an overbought level, indicating solid bullish momentum for gold, short term or further consolidation.
On daily charts, silver rose further after two days of gains and is now trading around $28.50. The MACD green momentum column weakened slightly on the daily chart, with KDJ stochastic trying to approach the overbought level, indicating silver bearish momentum weakened and prices may move higher in a volatile fashion.
4-hour chart, silver prices continue to rise through all moving averages, the current focus on whether the 28 can stand. The MACD red kinetic energy column was basically stable, and the KDJ stochastic index was approaching the overbought level, indicating solid bullish momentum for silver, short term or further volatility.
Fundamentals positive factors:
- Tension between China and India. The Times of India reported On Monday that in a strategic move, the Indian army has occupied high ground on the left bank of The Pangongtso Lake in Ladakh, putting it on top of the area. Earlier, an Indian military spokesman said India had foiled Chinese troops’ entry into Indian territory near the southern bank of Lake Banguong Cho.
- Chinese Vice Foreign Minister Qin Gang recently met with Czech Ambassador to China Tonford and lodged solemn representations with President of the Senate of the Czech Parliament Miriam Westerchiar over her visit to Taiwan.
- Tension between China and the United States. Us Secretary of State Mike Pompeo said in an interview on Monday (August 31) that President Trump was considering restricting Chinese students from studying in the US, adding that the US government could announce new actions against China in the coming weeks and months.
- Mr Powell said the Fed would seek to achieve an average inflation target of 2 per cent, offset periods of sub-2 per cent inflation with high inflation for “an extended period” and launched an aggressive new strategy to boost employment, with the policy generally bearish for the dollar.
Fundamentals negative factors:
- On Friday, Congressional Democrats and the White House remained divided over how much the next stimulus package should spend to help the coronavirus hit us economy.
- House Speaker Nancy Pelosi issued a statement saying Democrats and Republicans remain far apart on the next economic stimulus package.
- U.S. stocks surged on Wednesday, pushing the S&P 500 to a record closing high for a fourth straight session, as investors remained focused on broader momentum stocks that have outperformed since the outbreak of the coVID-19 pandemic.
- Holdings in the SPDR Gold Trust, the world’s largest Gold ETF, fell 3.51 tons, or 0.28 percent, from its current position of 1248.87 tons.