· Gold prices edged higher on Thursday after the U.S. House of Representatives voted to impeach President Donald Trump, stoking fears of political uncertainty in the world's largest economy.
Spot gold was up 0.1% at $1,476.69 per ounce, as of 0718 GMT. U.S. gold futures edged up 0.1% to $1,480.70 per ounce.
· Trump became the third U.S. president to be impeached as the Democratic-led House formally charged him with abuse of power and obstruction of Congress in a historic step that will inflame partisan tensions across a deeply divided America.
Cautious sentiment supported bullion, often seen as an alternative investment during times of political and financial uncertainty.
· "The impeachment is resulting in a slight increase of the uncertainties and we're seeing gold inch higher on the back of that," said ANZ analyst Daniel Hynes. "This news is also offsetting headwinds such as strong equity markets, the (U.S.-China) trade deal and better economic data."
Although the reaction to the impeachment was largely muted, Asian shares pulled back from a one-and-a-half year peak, while the U.S. dollar eased slightly against a basket of currencies, making gold cheaper for holders of other currencies.
· If the U.S. Senate convicts, "which would be unexpected, then that throws next year's election in a very uncertain place," Ilya Spivak, a senior currency strategist at DailyFx said, adding that gold prices will then gain on risk aversion.
· Capping further gains in bullion, China's finance ministry published a new list of six products from the United States that will be exempt from tariffs starting Dec. 26.
Two U.S. Federal Reserve policymakers on Wednesday said the U.S. economy is in good shape following three interest-rate cuts this year, reiterating the consensus at the Fed for keeping borrowing costs where they are for the time being.
· Strong U.S. November manufacturing data released earlier this week also cemented Fed's view. Gold is highly sensitive to any reduction in interest rates, which decreases the opportunity cost of holding non-yielding bullion.
· Holdings of the world's largest gold-backed exchange-traded fund, SPDR Gold Trust, rose 0.3% to 883.29 tonnes on Wednesday.
· Next recession will be more severe than the last, says Peter Schiff
As the Fed expands their balance sheet in the form of “unofficial” quantitative easing, inflation will rise, which will push gold prices up said Peter Schiff, CEO of Euro Pacific Capital.
“I think the price of gold is going up next year, so I want to own it, but I don’t know how much is going to go up, but I do believe that once we really start to take off, gold can go from $1,500 to $2,000 very quickly,” Schiff told Kitco News.
“The fact that the curve has inverted I don’t think means that the recession has been avoided. Maybe it’s been delayed a little bit, and typically when you have recessions, the yield curves will normalize prior to the recession,” he said.
Schiff said that we are still headed for a recession and that it will be more “severe” than the last one.
· With the global traders awaiting results of the key events/data, Gold prices seesaw near $1,475 amid the initial Asian session on Thursday.
Among the top-tier events, the US House of Representatives’ voting to impeach President Donald Trump will be crucial. The house is scheduled to hold two voting sessions for abuse of power and obstruction of Congress, as far as the meddling in Turkish politics is concerned. Ahead of the event, the Washington Post says, “Based on public announcements, Democrats have enough votes to approve articles of impeachment against Trump for abuse of power and obstruction of Congress. Wednesday’s action will lead to a trial in the Republican-led Senate, where a two-thirds vote would be required to remove the president from office.”
Following that, a busy calendar including employment data from Australia, monetary policies of the Bank of Japan (BOJ) and Bank of England (BOE) coupled with the second-tier data from the US, Canada and Switzerland will entertain momentum traders.
The market’s risk tone recovered on Wednesday as the US Federal Reserve (Fed) policymakers held their upbeat tone. The same might have helped the US Dollar (USD) to extend earlier recoveries and exert downside pressure on the yellow metal.
However, the latest readings of the US 10-year treasury yields and S&P 500 Futures suggest a cautious sentiment prevails among the market players.
Technical Analysis
21-day Exponential Moving Average (EMA) surrounding $1,471 acts as immediate support while buyers will wait for a clear break of the month-old rising trend line, at $1,489 now.
· Gold Price Analysis: XAU/USD tight range goes on below $1480/oz
The yellow metal has been trading in an unusual tight trading range for the third consecutive day just below the 1480 resistance and the 50-day simple moving averages (DMAs).
XAU/USD is chopping below the 1480/85 resistance zone while above the main SMAs on the four-hour chart. The bulls are likely waiting for a reason to break above the 1480/85 resistance zone. In case the breakout has follow-through, the next resistances could be located near the 1494 and 1510 levels. On the flip side, if the sellers take over and fade 1480/85, XAU/USD could decline towards the 1460/50 support zone.
· Technical Analysis
Gold prices are storing volatility which is getting pent up as prices trade sideways. resistance near the 50-day moving average near 1,477. Short term support is seen near the 10-day moving average at 1,470. Additional support on the yellow metal is seen near an upward sloping trend line that comes in near 1,462. Momentum is decelerating. Short term momentum recently turned positive as the fast stochastic generated a crossover buy signal. The trajectory of the fast stochastic is turning, and should not be considered neutral. Medium-term momentum is positive to neutral as the MACD histogram prints in the black with a declining trajectory which points to consolidation. Gold prices are poised to break one way or another, as volatility has hit the lowest levels of the year.
· Elsewhere, palladium edged up 0.4% to $1,930.18 per ounce. Prices of the autocatalyst metal had hit an all-time peak of $1,998.43 on Tuesday.
Palladium prices are within a whisker of breaking above $2,000 an ounce for the first time, with a gaping supply deficit fuelling a remarkable run.
Silver dipped 0.1% to $16.99 per ounce, while platinum slipped 0.4% to $931.68.
Reference: Reuter, FXStreet
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