· Gold prices steadied on Monday as a strong U.S. dollar countered support from rising tensions between the United States and China over the coronavirus outbreak.
Spot gold was steady at $1,699.49 per ounce by 0601 GMT, having gained over 1% on Friday after President Donald Trump threatened to impose tariffs on China. U.S. gold futures gained 0.4% to $1,707.90.
· U.S. Secretary of State Mike Pompeo said on Sunday there was "a significant amount of evidence" that the virus emerged from a Chinese laboratory, but did not dispute U.S. intelligence agencies' conclusion that it was not man-made.
His comments follow Trump, who on Friday said raising tariffs on China is "certainly an option" as he considers ways to retaliate for the spread of the virus.
· "Some sort of fears are there that the trade war might be ignited and such events are good for gold. All these comments from officials indicate a new round of hostility as far as the trade is concerned with China," said Avtar Sandu, senior commodities manager at Phillip Futures.
· Gold had risen 18% last year as the Sino-U.S. trade dispute increased demand for the safe haven amid interest rates cuts by the U.S. central bank.
· The U.S. dollar moved away from an over one-month low on Monday, making gold costlier for investors holding other currencies.
· "U.S. dollar demand is competing for safe-haven lustre in Asia this morning," said Stephen Innes, chief market strategist at financial services firm AxiCorp, in a note.
On the macro front, investors will be watching out for the April U.S. jobs report due on Friday.
· "Beyond the rhetoric from Washington we would expect gold to consolidate until the non-farm payrolls figures are out. A decline in the (unemployment) numbers wouldn't be good for gold prices," Phillip Futures' Sandu said.
· The Federal Reserve has kept interest rates at near zero, with other central banks and governments taking similar measures to cushion their economies from the impact of the pandemic.
The widespread fiscal and monetary impetus will support bullion in the longer term as it is often seen as a hedge against inflation and currency debasement, analysts said.
· Reflecting an appetite for gold, holdings in the world's largest gold-backed exchange-traded fund, SPDR Gold Trust, rose 1.1% to 1,067.90 tonnes on Friday.
· Palladium rose 0.9% to $1,915.99 per ounce, while platinum slipped 0.4% to $757.30 and silver was down 0.5% at $14.86.
· Gold prices could “break the highs” seen earlier this year, after declining in March along with assets across the board, according to UBS Investment Bank’s Joni Teves.
“There is growing potential (for gold) to break $1,800 (per ounce) in my view,” Joni Teves, precious metal strategist at UBS Investment Bank, told CNBC’s “Squawk Box Asia” on Monday. In the near term, the firm has a target price for gold at $1,790 per ounce.
That comes as “investor interest continues to grow in this environment of uncertainty and negative real rates,” Teves said.
· Gold Price Analysis: Yellow metal charts pennant pattern
Gold has carved out a narrowing price range or a pennant pattern on the daily chart, which comprises of trendlines connecting lower highs and higher lows.
A close above the top end of the pennant at $1,728 would confirm pennant breakout and signal a continuation of the rally from the April 1 low of $1,568 and open the doors to re-test of recent highs near $1,750.
Alternatively, a downside break of the pennant would imply a bullish-to-bearish trend change and could be followed by a drop to $1,600.
The 14-week relative strength index has formed lower highs, indicating buyer fatigue. Hence, pennant breakdown on the daily chart cannot be ruled out.
· Gold Price Analysis: Depressed below $1,700
Gold prices drop to $1,698.40, intraday low of $1,697.80, amid the early Asian morning on Monday. In doing so, the yellow metal not only fails to cross 100-HMA and 200-HMA but also stays below a seven-day-old falling trend line.
As a result, sellers might be looking for 61.8% Fibonacci retracement of April 21-23 upside, near $1,691, as immediate support during the further downside.
Even if the MACD fails to remain strong below $1,691, $1,680 and Friday’s low near $1,670 could lure the bears.
Meanwhile, an upside clearance of 100 and 200-HMAs, respectively near $1,702 and $1,708, could escalate the recovery moves towards short-term resistance line, at $1,717 now.
In a case where the buyers manage to cross $1,717, $1,722 and $1,736 can offer intermediate halts during the bullion’s rise towards $1,739 and the previous month high near $1,748.
Reference: Reuters, FX Street, Daily FX
Thai
Eng