The U.S. dollar index.DXY was at around 92.80 in intraday Asian trading On Thursday. Despite the dollar’s strength, spot gold’s short-term gains accelerated, with gold just breaking through the $1,950 / oz barrier. The Chinese Embassy in Washington issued its latest response to a statement by the US State Department on Wednesday that it would impose restrictions on the work activities of Chinese diplomats in the US. While a stronger dollar put downward pressure on gold prices, tensions between China and the United States kept the market in a risk-off mood, driving the rally, analysts said.
Spot gold fell nearly 1.4% on Wednesday, weighed down by a rising dollar. New orders rose more than expected in July, while U.S. manufacturing data on Tuesday showed activity accelerated to a nearly two-year high in August, adding to optimism about a steady economic recovery.
U.S. data on Wednesday showed factory orders rose 6.4 percent in July, above expectations of 6 percent and 6.2 percent. Data from the Institute for Supply Management on Tuesday showed the ISM manufacturing PMI rose to 56 in August, its highest level since January 2019.
The dollar index.DXY closed at 92.64 on Wednesday, up 0.34 percent, having hit an intraday high of 92.88. Spot gold closed at $1,942.47 an ounce, down $27.48, or 1.39 percent.
Gold rebounded in Asian trading on Thursday as tensions between China and the U.S. continued to push the spot price above $1,950 an ounce in the short term.
George Gero, managing director of Wealth Management at Royal Bank of Canada, said in a note that gold prices should continue to be supported as investors’ persistent concerns about the spread of the virus and the low interest rate environment tend to push them into sharp falls.
Commerzbank analyst Eugen Weinberg said that in addition to other strong fundamentals, such as a weak economy and falling interest rates, the Australian and U.S. mints reported very high demand for gold COINS, which will push gold prices above $2,000 in the long term.
On top of the geopolitical situation, gold has room to rise as the Fed maintains its dovish stance.
On Thursday, Federal Reserve Chairman Colin Powell announced a major policy shift at the central bank’s annual meeting in Jackson Hole. Mr Powell says the Fed will adopt an average inflation target, which means that interest rates are likely to remain low even if inflation rises slightly in the future.
“The Fed has said it can keep inflation above its 2 percent target for some time and it looks as if they will keep monetary policy extremely loose, which should help gold,” said David Madden, market analyst at CMC Markets UK.
Adrian Day, CHIEF executive of Adrian Day Asset Management, says investors should not worry about some short-term profit-taking and consolidation as he remains bullish on gold, which will break through $2,000 by the end of the year, as the dollar enters a new long-term downward path thanks to the Fed’s ultra-loose monetary policy.
After two weeks of consolidation below $2,000 an ounce, expectations have risen that gold prices could regain key psychological levels this week, according to Kitco’s Weekly Gold Survey released on Friday.
Last week, 15 Wall Street professionals responded to the survey. Of those who took part, 12 (80 per cent) expected gold to rise; Three analysts (20%) are neutral on the market and none is bearish.
Ole Hansen, head of commodity strategy at Saxo Bank, noted that the dollar’s earlier rally after hitting a two-year low had hurt gold bulls. Hansen believes that short-term volatility in the gold market will rise as the market consolidates but remains bullish in the long term.
New information on the situation between China and the US
Local time on September 2, the U.S. state department issued a statement that will work for Chinese diplomats in the activity restrictions, including the Chinese ambassador to the United States senior diplomats to visit the university and meet with local officials to be approved by the us side, China’s ambassador to the United States embassy or consulate outside the embassy for more than 50 people cultural activities must be approved by the United States.
“Today, I would like to announce that the State Department has established a mechanism for senior Chinese diplomats in the United States to obtain permission to visit university campuses and meet with local government officials; Permission is also required to host cultural events involving more than 50 people outside the diplomatic quarters of the Chinese embassy.” He also claimed the move was a response to Beijing.
According to Reuters, Washington sees the new measures as a response to what it says are Beijing’s restrictions on U.S. diplomats in China. In a statement, the agency also said it would take action to ensure that the social media accounts of all Chinese embassies and consulates are ‘correctly identified.’
On September 3, the Chinese Embassy in the US issued its latest response, saying that the US had once again placed unreasonable restrictions on Chinese diplomatic and consular personnel in the US under the pretext of so-called reciprocity and created artificial obstacles, which was a gross violation of the Vienna Convention on Diplomatic Relations and the Vienna Convention on Consular Relations. China is firmly opposed to this. The move also runs counter to the us’ self-proclaimed concept of openness and freedom.
The Chinese Embassy in the US pointed out that The Chinese side always supports diplomatic and consular personnel from other countries including the US in carrying out official activities in China in accordance with law and provides necessary facilities. We urge the US side to correct mistakes, revoke relevant decisions, and provide support and facilitation for Chinese diplomatic and consular personnel in the US to carry out relevant activities.
Trump has made China a key election issue, calling his administration’s policies tough on China, while attacking Democratic presidential candidate Joe Biden, who said his election would be a gift to the Chinese Communist Party.
China and the United States have retaliated on diplomacy, trade, media access, human rights, the COVID-19 pandemic, The Chinese government’s claims to the South China Sea, and Hong Kong’s national Security law.
Us Secretary of State Mike Pompeo said on Tuesday that the Trump administration will announce major policies in the near future to counter China’s theft of sensitive US technology and boost the US economy in a broader area.
Peng’s President in an interview with fox business channel is a list of the trump of the government in the past for a period of time to take relevant measures, including restrictions on China telecom, huawei company in the United States, close by him become a spy agency, the Chinese consulate in Houston, and the federal bureau of investigation and the justice department investigation and prosecution us some delivery for China science and technology intelligence in the university campus.
Pompeo said On Tuesday that South Korea and other U.S. Allies would work with the United States to counter “economic and political aggression” from China. “I think you’re going to see the world start to come together around a core consensus that the Chinese Communist Party will refuse to compete in a fair, reciprocal and transparent way,” Mr Pompeo said.
Pompeo cited actions taken by the Trump administration to limit the activities of Chinese companies like Huawei and said he expected further action. Pompeo also said Tuesday that he hopes to close all Chinese Confucius Institute cultural centers on U.S. university campuses by the end of the year.
On Tuesday, the U.S. Trade Representative’s office announced it would extend exemptions for some Chinese goods, including smartwatches and medical masks. But the extension is only until the end of 2020, compared with the previous one-year extension.
Last year the Trump administration announced tariffs of 15 per cent on about $125bn of Chinese goods, followed by a reduction in tariffs from 15 per cent to 7.5 per cent in the first phase of a trade agreement signed between the two countries in January. The exemption from the 7.5 percent tariff will be extended until December 31, according to a U.S. federal proclamation.
The office of the United States Trade Representative had previously granted the products a one-year tariff waiver, but the latest announcement didn’t specify why the waiver would be extended for only another four months. But the Trump administration has said it will raise tariffs if China fails to implement the trade deal.
Us Secretary of State Mike Pompeo said in an interview on Monday that President Trump is 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.