- Gold maintains positive Friday momentum to break through $ 1,970.
- Traders applaud the weak US dollar, ignore mixed updates on the virus and vaccine.
- US Congress grappling with COVID-19 budget, US-China fight remains on the table.
- Chinese PMIs, Japanese retail sales and industrial production decorate the calendar.
Gold prices kick off the week’s trading with a rise to $ 1,974.61, currently around $ 1,971 / 72. In doing so, the yellow metal extends Friday’s gains while applauding the weak US dollar. and mixed fundamental signals have appeared late. Also, helping the bulls could be a clear break from a descending trendline from August 07. It is worth mentioning that the yellow metal needs a daily close beyond $ 1,976 to challenge the first negative monthly close in the previous five months.
The weakness of the US dollar renews purchases …
While the Sino-U.S. Brawl and US stimulus concerns continue to constrain the drop in the yellow metal, it was the declines in the US dollar that reminded the bulls on Friday. The U.S. Dollar Index (DXY) reversed Fed-backed gains on Thursday while marking the heaviest losses to revisit the 27-month low flashed on August 18. inflation. The greenback has previously applauded Federal Reserve Chairman Jerome Powell’s push for flexible monetary policy even if inflation slightly exceeds the 2.0% target for some time.
Additionally, the news that US policymakers are still scrambling over the coronavirus (COVID-19) aid package joins mixed signals relating to the pandemic to propel bullion prices up. Having previously abandoned talks on the COVID-19 aid package, Republicans and Democrats are mutually complaining about the stalemate. Recently, White House Chief of Staff Mark Meadows blamed the deadlock of a new coronavirus relief bill on House Speaker Nancy Pelosi, the Politico newspaper reported. Elsewhere, US health official Dr Fauci appears to be backing down from his previous suggestion of not rushing for the cure while pointing to an early vaccine. On the other hand, Professor Richard Peto of the University of Oxford cites fears of worsening the crisis if an untested vaccine is rushed. Amid all these catalysts, virus numbers from key economies including the United States and excluding Europe, while America, Brazil and India, sadly, take the top spot. .
Against this backdrop, the risk tone of the market remains bullish, with Wall Street welcoming the bulls and the S&P 500 Futures picking up bids near a record high above 3,500. Additionally, 10-year US Treasury yields hover around 0.72%.
Looking ahead, traders will keep an eye on China’s official PMI data for new direction, while Japan’s industrial production and retail sales may also keep traders entertained. Although Tokyo’s industrial production may recover year-on-year, the first expected contraction in manufacturing activity in China could keep the golden bulls happy.
A clear break out of the 21-day SMA, currently around $ 1,970, becomes necessary for the bulls to applaud an upward release from the three-week downtrend line, to $ 1,933.70 now.