· Gold and silver look soft heading into the EU open
Gold and silver are both looking heavy this morning after dropping in the Asian session. Gold is trading -0.84% lower at $1730/oz while silver lost 2.70% to trade at around $25.50/oz.
Risk sentiment was mixed in the Asia-Pac area as the Nikkei 225 fell 2.07% but the Shanghai Composite (1.14%) and ASX (0.66%) both traded in the black. The drop in the Nikkei was somewhat expected after the BoJ dropped it's JPY6 tln yen ETF buy target on Friday but they did maintain the JPY 12tln yen ceiling.
In the FX markets, the dollar index once again pushed higher by 0.14% and AUD/USD was the biggest mover from the majors falling 0.30%. It must be noted that the Turkish Lira fell heavily at the open after Turkey's President Erdogan sacked the finance minister.
In the rest of the commodities complex, copper (-0.28%) and spot WTI (-1.34%) both struggled. Tin, zinc and nickel all traded higher overnight.
Looking at the news, Bank of Japan Governor Kuroda says his 2% inflation target is helping stabilise FX rates. The comments came after the BoJ decision last week.
Sticking with central banks, PBOC Governor Yi Gang says Bank still has space to expand liquidity. He also added, China's total debt-to-GDP ratio, remains at a stable level, which helps create an environment less likely to spawn financial risks.
From the US, we heard from Fed's Barkin. He said the dot plot is not FOMC policy and there was still no mention of YCC.
There were some weekend reports that the EU are to limit AstraZeneca exports to the UK. Adding to this it was been rumoured that the EU will even block some ingredients to make the vaccine entering the UK.
Italy are looking for a plan to help businesses with a EUR 30bln rescue package. Italy has been subject to more restrictions that are putting businesses in the country under pressure.
Looking ahead to the rest of the session highlights include comments from Fed's Powell, Barkin, Daly, Bowman, ECB's Schnabel and Lane. Data highlights include ECB asset purchase data and US existing home sales.
· Gold Price Analysis: Break below $1728 to pave the way for further XAU/USD weakness
Gold witnessed some selling during the early part of the trading action on Monday. The yellow metal is not out of the woods yet, as an ascending trend-line holds the key for XAU/USD bulls, FXStreet’s Haresh Menghani briefs.
Key quotes
“The upside seems limited as investors seemed reluctant from placing bullish bets ahead of the Fed Chair Jerome Powell's speech in a virtual panel discussion. Powell and Treasury Secretary Janet Yellen will also make their first joint appearance before the US House Financial Services Committee on Tuesday to testify on Fed and Treasury COVID-19 policies.”
“The lack of any strong follow-through buying beyond the $1740-42 supply zone warrants some caution before positioning for any further appreciating move. This, coupled with the fact that the post-FOMC positive move faltered ahead of the $1760-65 horizontal support-turned-resistance, favours bearish traders.”
“A sustained break below the trend-line support, currently near the $1728 region will reaffirm the negative bias and pave the way for further weakness. Gold might then turn vulnerable to break through the $1720 intermediate support and accelerate the slide towards the $1700 mark. The downward trajectory could further get extended and drag the metal back towards the multi-month low, around the $1677-76 region touched earlier this month.”
“Any meaningful upside might continue to confront stiff resistance near the $1760-65 region. A convincing breakthrough might trigger a short-covering move and push the metal further towards reclaiming the $1800 round-figure mark.”
· Gold Futures: Neutral/Bullish near-term – UOB
Open interest in Gold futures markets rose by around 5.9K contracts on Friday according to preliminary figures from CME Group. On the other hand, volume shrunk by around 16.5K contracts after three consecutive daily builds.
Gold faces initial hurdle at $1,760/oz
Friday’s uptick in Gold prices was on the back of rising open interest, allowing for the continuation of the consolidative/bullish trend in the very near-term. That said, the next up barrier lines up around the $1,760 mark per ounce troy.
· Gold Trades Bearish as Developments in Turkey Strengthen USD
At the start of a brand new trading week, gold prices are sliding lower as investors move towards the US dollar in response to Turkish president sacking the country’s hawkish central bank governor over the weekend. At the time of writing, GOLD is trading at a little above $1,733.
In response to the latest in a round of several rate hikes through his tenure, the previous central bank governor Naci Agbal was replaced via a decree of President Erdogan on Saturday. In his place, he appointed Sahap Kavcioglu, a legislator from the ruling party and a critic of high interest rates.
This sudden and unexpected development sent global markets into a risk-off mood, driving investors away from riskier instruments and towards the safety of currencies like the US dollar and Japanese yen. As we know, gold shares a negative correlation with the dollar, as a stronger greenback makes it more expensive for holders of other currencies to invest in the yellow metal.
Gold has also been trading bearish in the past few sessions on the back of a strengthening in US Treasury yields which hike the opportunity cost of holding non-yielding bullion. A dovish Fed and expectations for stronger economic recovery in the US have sent the benchmark 10-year US Treasury yields to an over one-year high, putting pressure on the yellow metal lately.
Reference: Kitco, FXstreet, FXLeaders
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