Spot gold was trading slightly higher at around $1,950 in early Asian trading on Monday. Spot gold, which fluctuated broadly between $1,932 and $1,973 last week, pulled up from the previous day’s plunge on Friday to close at $1950.30 an ounce after gaining 0.53 percent last week. The U.S. dollar index.DXY, which fluctuated broadly last week, rebounded overnight after losing 93 on Tuesday. The Fed’s decision continued to rally strongly into Thursday morning, hitting a weekly high of 93.63 during the day, but fell back below the 93 mark to close at 93.00 on Friday. It fell 0.29% last week.
The geopolitical situation continues to be the focus of risk sentiment.
According to the latest reports from Indian media, including Opindia.com and India Today, Indian troops have taken up six new heights along the LAC in eastern Ladakh in the border stand-off with China. The new uplands include Rachana La, Rezang La, Mokhpari, Gurung Hill, Magar Hill and the largest peak on the Finger 4 ridge. This puts the Indian army in a better position than the Chinese army in the difficult mountain areas. India Today reported that the peaks were the latest strategic locations on the India-China border to be controlled by The Indian army in September.
Indian freelance journalist Rajiv Sharma has been arrested on suspicion of passing sensitive information to “Chinese intelligence agencies,” police said on Saturday. Indian police said he was also found to be in possession of classified documents relating to defence and that an investigation was under way and further details would be released in due course. A Chinese woman and her Nepalese companion were also arrested after Indian police said they paid large sums of money to the journalist through a shell company.
Hu Xijin, editor-in-chief of the Global Times, pointed out that India had recently arrested a “Chinese spy”, a freelance journalist named Sharma, 61. Interestingly, both the Indian announcement and the Indian media’s coverage of the story highlighted the fact that Sharma had written for the Global Times, enough to create a negative association against the global Times. India alleges that the man came to the attention of Chinese intelligence agents after writing an article in the Global Times and gradually began to sell Indian defense information to China.
The latest news has come from the situation across the Taiwan Straits. Two IDF fighter jets of the Taiwan Army were surrounded by six FIGHTER jets of the People’s Liberation Army (PLA) on September 19 when they were on a mission to evacuate, the Taiwan media reported on Sunday. The IDF fighters belong to the 3rd Wing of the Taiwan Air Force and are based at The Qingquangang base in northern Taiwan. The IDF fighters were sandwiched by six PLA jets at an altitude of 5, 000 meters after they were scrambled Monday in response to the PLA’s actions near the so-called “Middle Line” of the Strait. According to Taiwanese media, the six fighter jets dispatched by the PLA are all J-16 fighters.
According to Taiwan military officials, in the face of PLA aircraft disturbing Taiwan, because it is impossible to judge the real intention behind it, the Taiwan army maintains a non-aggressive attitude and avoids accidental encounters. Recently, it also sent personnel to the Air Force Operational Command for training and education, requiring pilots to comply with regulations. The military official stressed that although both sides claimed not to fire the first shot, it did not mean that they could not fire. The key is to “exercise the right of self-defense and counterattack”, and international law and other norms should be fully considered. However, “if the Taiwan army is attacked, we will certainly retaliate”.
On the US-China situation, US President Donald Trump said on Saturday that he had approved in principle a deal between Oracle and Wal-Mart to partner with TikTok, a popular US video-sharing app that will avoid closure. “I support the deal — if they get it done, that’s fine, and if they don’t, that’s fine,” Trump told reporters. I gave conceptual approval to the deal.”
The result could bolster Oracle’s position as a company capable of handling challenging computing workloads and help resolve geopolitical disputes between China and the United States. The new company will be called TikTok Global, according to U.S. Treasury Secretary Steven Mnuchin. The Chinese government must now sign off on the deal to move forward.
On domestic politics and economics, Powell, chairman of the federal reserve, will testify on the novel coronavirus crisis in the house of representatives from Wednesday to Thursday (September 22 solstice 23). Treasury secretary mnuchin will also attend the hearing on the 22nd. On The same day, Powell and Mnuchin will again appear before the Senate Finance Committee to report on the quarterly implementation of the COVID-19 Assistance, Relief and Economic Security Act (CARES Act).
The two leaders in charge, fiscal and monetary, could come together to determine whether market sentiment is skewed towards risk or risk aversion. In previous interviews, Mr Powell has stressed the need for sustained monetary support and has increasingly stressed fiscal support. He said the role of monetary policy was limited and called on the federal government to step in.
Last week, Republicans and Democrats were deadlocked over a $1.52 trillion proposal for a new fiscal stimulus. Since passing a $3 trillion rescue package in May, Republicans have been hoping to reduce the size of the second round. But the market’s reaction to the bill’s difficult delivery has been surprisingly muted, perhaps a sign that some degree of bipartisan intransigence has been priced in ahead of time. But in one piece of good news, Democrats and Republicans reached a deal over the weekend on a temporary spending bill to avoid a government shutdown in the new fiscal year.
Aftermarket outlook: Bullish sentiment warming, gold is expected to break $2000?
For gold bulls, although last week didn’t see a major breakout, the week was still full of opportunities. Among them, following two big much factor, it is long the biggest rely on.
First, the market’s bullish sentiment towards gold has been improving for several weeks. Speculative long positions in COMEX gold futures surged 11,339 lots to 324,512 lots in the week ended Sept. 15, according to the CFTC Positions Report. Even gold etfs, where inflows have been weak recently, reversed course last week. Holdings data showed the SPDR Gold Trust, the world’s largest Gold exchange-traded fund (ETF) known as SPDR, increased its holdings by 12.85 tonnes on September 19, the largest increase in nearly three months, after weeks of sell-offs.
Second, from a technical point of view, gold prices also appeared a breakthrough opportunity. Although gold’s rally slowed last week because the Fed did not provide enough stimulus, it is expected to remain sideways this week, but could still regain its upward trend if it breaks through key levels, said Analyst Rajan Dhall.
“Gold needs to focus on resistance at $1973.64 this week. Any break above that and gold will reopen an upward path to $2,000.”
Looking ahead, the market is also watching to see if the recent bearish trend against the dollar has reversed. This week’s PMI readings for us manufacturing and services will give investors a better sense of the state of the US economy and the outlook for the dollar. Also, investors will need to keep an eye on Powell and Mnuchin’s Senate testimony, where they are likely to talk about the need for fiscal stimulus.