Gold dips as dollar holds onto gains as investors focus on U.S.-China spat
· Gold prices fell on Monday as the dollar held onto gains made after better-than-expected U.S. payrolls data, while investors kept a close eye on Sino-U.S. relations ahead of scheduled trade talks.
· Spot gold was down 0.3% to $2,028.90 per ounce by 0336 GMT. U.S. gold futures rose 0.6% to $2,039.20.
· Japanese and Singapore markets were closed for public holidays.
· Gold hit a record high of $2,072.50 on Friday before retreating nearly 2% as the dollar bounced on data showing U.S. nonfarm payrolls increased 1.763 million in July.
· “The stronger dollar narrative is weighing on investors’ decisions, along with the fact that people will be more (prone) to profit-taking after such a big run-up,” said Stephen Innes, chief market strategist at financial services firm AxiCorp.
· “A correction is very possible here. It really depends on how market views the overall dollar, with U.S.-China trade escalation sort of favourable to the dollar.”
· The dollar has, on occasion, been the favored safe haven amidst flare-ups in tensions between Washington and Beijing.
· Last week, U.S. President Donald Trump took steps to ban two popular Chinese apps.
· “There is room here for people to unwind some of their gold exposure,” said DailyFx currency strategist Ilya Spivak, since it appears the U.S. Federal Reserve might start “to take their foot off the gas” on aggressive stimulus after recent better economic data.
· Speculators reduced their bullish positions in COMEX gold and silver contracts in the week to Aug. 4.
· But gold’s appeal as a safe haven has been underpinned by the uncertainty driven by the coronavirus pandemic, with resultant widespread global stimulus also fueling concerns of inflation, helping bullion surge over 33% so far this year.
· In the United States, which has marked a grim milestone of 5 million cases, Trump signed executive orders on Saturday partly restoring enhanced unemployment payments to millions of Americans.
· The gold rally could forge ahead to $4,000, but analyst says two events could turn its fortunes
Gold prices could forge ahead to $4,000 per ounce in the next three years, but factors such as the development of a coronavirus vaccine and the November U.S. elections could change the fortunes of the precious metal, analysts say.
This year, gold prices have shot to record highs not seen since September 2011. Investors have been fleeing to “safe haven” assets as the pandemic shows no signs of abating. Last week, gold prices surged above $2,000 per ounce for the first time.
“It’s quite easy to see gold going to $4,000,” Frank Holmes, CEO at investment firm U.S. Global Investors, told CNBC on Monday.
He pointed to the trillions of dollars needed in stimulus to tide the U.S. economy during the coronavirus pandemic, and added that G-20 finance ministers and central banks are “working together like a cartel and they’re all printing trillions of dollars.”
“We’ve not seen this level where central banks are printing money at a zero interest rate. At zero interest rates, gold becomes a very, very attractive asset class,” Holmes said.
While Yung-yu Ma, chief investment strategist at BMO Wealth Management — U.S., agreed that there are many factors supporting gold, he pointed to two big events that could change the direction of prices.
“We’re just cautious extrapolating these current factors ... especially when we know there are two big events on the horizon that could change that trajectory. One is of course the vaccine development, and the other is the elections,” he told CNBC on Monday. “We think ... especially the vaccine has potential to shift some of those positive factors that are working right now in the favor of gold,” he said.
Depending on how the U.S. elections go, analysts have said that gold prices could react accordingly.
According to New York-based research provider Third Bridge Group, gold prices could fall to below the $1,600 mark after the elections, before rallying again next year.
· Elsewhere, silver fell 1.2% to $27.96 per ounce, while platinum rose 0.7% to $968.56 and palladium climbed 0.6% to $2,188.83.
Reference: CNBC
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