Spot gold was down about $7 to around $1908 in early Asian trading on Tuesday after edging higher. Spot gold fell $37.49, or 1.92 percent, to close at $1912.23 an ounce after hitting an intraday high of $1955.40, its lowest level since Aug. 12 at $1882.60.
Powell, chairman of the federal reserve, will testify at a house of representatives panel hearing on the coronavirus crisis from Wednesday to Thursday (September 22, solstice, 23). Treasury secretary mnuchin will also appear at a hearing on September 22. 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.
Analysts at Commerzbank said the US Federal Reserve’s monetary policy meeting on Wednesday was highly bullish for gold as the central bank said it did not expect to raise interest rates until 2023. They also say the Fed’s forward guidance should be negative for the dollar.
“I can see the dollar trading even higher this week if Powell and other Fed speakers don’t add more to the Fed’s plan for how to get to an average 2 percent inflation rate,” said Erik Bregar, head of fx strategy at Forex Bank of Canada.
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.
The geopolitical situation continues to be the focus of risk sentiment.
On Monday, India demanded that China withdraw its troops from “specific and complete” “friction points” such as Pangong Tso, Chushul and Gogra-Hotsprings, and finalised a road map for de-escalation across the eastern Ladakh border, according to a recent report in the Times of India. The meeting came a day after the sixth round of military-ministerial talks between China and India, in which Lt. Gen. Harinder Singh, commander of India’s 14th Army, met with Maj. Gen. Liu Lin, commander of the Southern Xinjiang Military Region, for the first time since Aug. 2. The meeting began at 9:30 a.m. local time and continued into the night.
According to The Times of India, the Indian side believes that there is “some disconnect” between the five-point diplomatic consensus reached by Indian Foreign Minister Sushil Jaishankar and Chinese Foreign Minister Wang Yi during their meeting on September 10 and the “actual situation” along the LAC. A source said: “The PLA continues to strengthen its positions along the LAC. It does not seem ready to defuse the situation. Unless China agrees to make major concessions, it will be very difficult to achieve a substantive breakthrough.” Up to now, neither China nor India has released official information on the outcome of the sixth round of china-India military-ministerial meeting.
Separately, an official told AFP on Monday that India’s new French Rafale fighter jets had conducted “familiar” flights over the country’s border with China. In June, India fought a deadly conflict with its two nuclear-armed neighbors. “Rafale fighters are in areas familiar with our operations, including Ladakh,” a senior air force official told AFP on condition of anonymity. On September 10th the first five of an order for 36 Rafale fighter jets worth $9.4 billion were commissioned. Defense Minister Rajnath Singh called the jets a ‘strong signal’ to New Delhi’s adversaries.
The latest news comes from the situation between China and Australia. Diplomatic relations between Australia and China have worsened after Australia called for an independent global investigation into the source of the coronavirus. Beijing has blocked Australian beef imports, lifted tariffs on Australian barley and launched anti-dumping investigations into Australian white wine. On Tuesday, The Australian arm of Huawei Technologies Co LTD said it will continue to cut staff and investment in Australia due to strained relations between the two countries.
In 2018, Australia banned Huawei from supplying equipment for a 5G mobile network, citing national security risks, a move the company criticized as politically motivated. “Simply put, the 5G ban on Huawei is costing us 1,000 high-tech and high-paying jobs out of the economy,” Jeremy Mitchell, huawei’s chief corporate officer for Australia, said in an emailed statement. “We have gone from 1,200 people to fewer than 200 and will be lower by next year.”
On the CHINA-U.S. front, a New York City Police Department officer has been charged with acting as an illegal agent in China and other criminal ACTS, the U.S. Justice Department said Monday. Baimadajie Angwang, 33, was born in China’s Tibet Autonomous Region, the Ministry of Justice said in a statement. He was arrested earlier Monday and is scheduled to appear in federal court in Brooklyn later in the day. The federal indictment accuses him of spying for China while spying on fellow Tibetans. He reportedly reported other Tibetan activities in the New York area to officials at the Chinese consulate in New York. Prosecutors on Monday asked a judge to hold Mr Angwang without bail because he was a “serious flight risk” to avoid criminal charges. The criminal charges carry a maximum penalty of 55 years in prison.
1.Atomic Energy Asset Management (Hong Kong) LTD., founder and fund manager on Monday expected gold to move higher this week. Gold held steady above 1900 last week, the SAR stop-loss index did not break below, and the dollar rallied after the Fed decision, indicating a fairly weak rebound that has been supportive for gold prices in the afternoon, he said. News over the weekend that the China-Canada trade agreement has been terminated has further boosted risk aversion in the market. As the US election approaches and trade disputes and geopolitical tensions remain high, it has a positive impact on the gold price. This week’s strategy is bearish.
- Citi continues to be bullish on the gold outlook, tactically bullish on gold in the short term and structurally bullish on gold in the medium term. Maintain a price target of $2200 / oz for 0-3 months and $2400 / oz for 6-12 months. The benchmark gold price forecast for 2021 is up about $300 an ounce from early July to a record $2,275 an ounce. But from a technical perspective, a close below the 55-day moving average of $1,920 an ounce would be seen as a warning of a further pullback. But given the situation in June, $1902-1093 / oz would provide very strong support.
- Credit Suisse says gold’s slide may not end until it hits a low of $1,765. The technical level to watch is whether $1897- $37 can be maintained. “Gold continued its expected consolidation after moving towards our base forecast target of $2075/80. While we continue to see a secular upward trend, reinforced by lower US real yields and a weaker dollar, our immediate bias remains to consolidate further above the $187/37 range of support, including a 23.6 per cent retracement of the rally from the 2018 lows, “said Credit Suisse. However, the bank added that gold could fall to $1,765 or even $1,726 if the short-term decline lasted longer than expected. In the longer term, Credit Suisse is bullish on gold, saying it could rise $2,300 an ounce.
- George Gero, managing director of ROYAL Bank of Canada Wealth Management, said the heavy selling in the gold market was not surprising because of a combination of factors. He noted that the threat of a second wave of blockades was dragging down economic growth, which in turn was dragging down the stock market. Now, however, Gero added, concerns are more serious because investors are holding out little hope for new stimulus measures to protect the economy. He added that if no new stimulus measures were announced, gold prices would continue to struggle.