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Gold prices firm as tepid dollar lends support

 

·         Gold prices edged higher on Monday, helped by a softer dollar while investors looked forward to speeches by Federal Reserve policymakers due this week for further clues on the U.S. central bank’s approach to inflation.

 

·         Spot gold rose 0.2% to $1,953.37 per ounce by 0334 GMT.

 

·         U.S. gold futures inched 0.1% lower to $1,960.50.

 

·         The dollar index was down 0.1% against its rivals, making gold more attractive for buyers holding other currencies.

 

·         Investors are now eyeing speeches by Fed committee members, including Chairman Jerome Powell, who will appear before Congressional committees later this week.

 

·         “The focus on Jerome Powell will be how much he is going to try to sway the Senate to provide more stimulus, more stimulus in the U.S. could lead to a weaker U.S. dollar and that would be positive for gold,” said Stephen Innes, chief market strategist at AxiCorp.

 

·         Gold has surged about 29% this year as governments and central banks worldwide released unprecedented global stimulus measures to revive their economies from coronavirus-induced slump.

 

·         Gold “remains in a range-trading mode, with resistance at $1975.00, and support at $1935.00 an ounce,” Jeffrey Halley, a senior market analyst at OANDA said in a note.

 

·         Also keeping the floor under gold were concerns emerging from a resurgence in COVID-19 cases globally that prompted major cities from Denmark to Greece to announce restrictions again, while worldwide cases crossed 30.78 million.

 

·         Gold, however, could struggle getting to $2,000 this year because of improving economic situation and benefits of a vaccine coming into play, AxiCorp’s Innes added.

 

·         Meanwhile, data from the Commodities Futures Trading Commission showed that speculators raised their net long position in COMEX gold by 10,622 contracts to 165,251 in the week ended Sept. 15.

 

 

·         Gold Price Analysis: XAU/USD due for a breakout, according to key indicator

 

- Gold remains stuck in a four-week-long descending triangle.

- A widely-tracked momentum indicator is teasing a bullish revival.

 

Gold's multi-week consolidation in a narrowing price range could end with a bullish breakout, as a widely-tracked daily chart indicator is about to turn bullish.

 

The yellow metal has carved out a descending triangle pattern over the past four weeks. The triangle's upper end or resistance is currently located at $1,960, and support is seen at $1,910.  Gold is trading at $1,953 per ounce at press time, representing a 0.13% gain on the day.

 

The daily chart MACD histogram, an indicator used to gauge trend strength and trend reversal, is printing higher lows below the zero line, a sign of weakening of the bearish momentum. Besides, the indicator now looks set to cross into bullish territory above zero.

 

As such, gold could soon take out the triangle resistance at $1,960. That would open the doors for $2,015 (Aug. 18 high).

 

·         Central bank gold demand has slowed but hasn’t disappeared – WGC

 

Central bank gold demand has been slowly declining through 2020, with July net purchases falling to their lowest level since December 2018. However, the World Gold Council said this sector remains an essential pillar of support for the gold market.

 

WGC said that foreign exchange reserve data from the International Monetary Fund shows that central banks collectively bought 8.2 tonnes of gold in July. So far, in 2020, central banks have bought just over 200 tonnes of gold.

 

In a recent interview with Kitco News, Shaokai Fan, head of central bank relations at the World Gold Council, said that although central bank demand has slowed through the summer, he doesn't expect that this sector will be net sellers anytime soon.

 

"The fundamental reasons central banks have been buying gold for the last ten years have not really gone away at all," he said.

 

"You have to remember that central banks are still looking to diversify their reserve assets away from the U.S. dollar, especially emerging market central banks, whose portfolios are dominated by the U.S. dollar," he added. "Another thing, it hasn't changed, are the lower negative interest rates that a lot of central banks are facing on their sovereign bond portfolios."

 

·         Silver Price Analysis: XAG/USD bulls snap two-day losing streak to attack $27.00

 

Silver prices rise to $26.91, intraday high of $26.96, during the Asian session on Monday. The white metal dropped from $26.84 to $26.50 at the start of the day’s trading. However, the following recovery attacks 10-day EMA resistance.

 

Other than the 10-day EMA level of $26.97, a falling trend line from September 01, at $27.13 now, also probes the bulls targeting the mid-September top surrounding $27.65.