Gold prices edge up as Hong Kong dispute riles China-U.S. ties
· Gold edged up on Thursday after hitting a two-week low in the previous session as the rift between Washington and Beijing over Hong Kong escalated, with prices also supported by central bank and government largesse to cushion the blow from the pandemic.
· Spot gold was up 0.2% at $1,712.39 per ounce, as of 0315 GMT, after dropping to $1,693.22 on Wednesday. U.S. gold futures were flat at $1,711.40.
· Worsening relations between the world’s two biggest economies could further hobble global business activity, which is already under intense pressure due to the coronavirus crisis.
· “The U.S. and China have disagreements on many fronts. There is trade, and there is inquiry into the coronavirus, and now this dispute over Hong Kong,” said Michael McCarthy, chief strategist at CMC Markets.
“That’s bad news for the globe as it spills over into trade — the impact on global growth, while the global economies are fragile, could be severe.”
· U.S. Secretary of State Mike Pompeo said on Wednesday that Hong Kong no longer qualifies for its special status under U.S. law, while President Donald Trump said he’d announce a response this week.
· “The U.S. is likely to respond to China’s new security laws on Hong Kong ... Weak economies and continued low interest rates are also supporting gold,” said National Australia Bank economist John Sharma.
· Japan approved a fresh $1.1 trillion stimulus package, while the European Union unveiled one of 750 billion euros.
Large stimulus measures tend to support gold, which is often considered a hedge against inflation and currency debasement.
· Reflecting investor sentiment, SPDR Gold Trust holdings, the world’s largest gold-backed exchange-traded fund, rose 0.2% to 1,119.05 tonnes on Wednesday.
· XAU/USD analysis: Tumbled to 1,705.00
Yesterday, the XAU/USD exchange rate tumbled to the 1,710.00 level. During Wednesday morning, the rate declined below the given level.
From the one hand, it is likely that some downside potential could prevail in the market. In this case the rate could target the 1,690.00/1,700.00 area.
From the other hand, it is likely that yellow metal could consolidate against the US Dollar in the 1,705.00/1,710.00 range.
Also, it is unlikely that some upside potential could prevail in the market, and the price for gold could exceed the 1,722.00/1,735.35 area due to the resistance formed by the 55-, 100– and 200-hour SMAs.
· ‘Rocks beat stocks’ gold is still on its way to $1,900 – Bloomberg Intelligence
The gold market has seen consistent selling pressure since hitting a 7.5 year high last week, but one analyst said that investors need to keep their eye on the bigger-long term picture.
Mike McGlone, senior commodity strategist at Bloomberg Intelligence, said that gold is just starting its bull rally and investors shouldn't get caught up in the short-term price action, "missing the forest for the trees."
McGlone described the latest price action in gold as "noise within the trend."
"The next really big step for gold is getting above $1,900; it's just a question of time," he said, "I don't see what it is going to take not to go higher and I can think of a dozen reasons for it to go higher."
With the Federal Reserve expected to maintain its extremely loose monetary policy and the global economy nowhere near the road to recovery after being disseminated by the COVID-19 pandemic, gold will remain in a long-term uptrend.
As to the timing of his call for gold prices at $1,900, McGlone said that if equity markets see another sharp correction in the fall, then gold prices could be at his target by the end of the year or early 2021.
· Gold Price Forecast – Gold Markets Show Resiliency
Gold markets rallied a bit during the trading session after initially dropping below the 50 day EMA on Wednesday, showing signs of life again. The $1700 level is a large, round, psychologically significant figure that will attract a certain amount of attention, just as the 50 day EMA would. At this point, the market is likely to continue to see demand for gold, for no other reason than to mitigate potential risks out there when it comes to portfolios. After all, we find ourselves in a very noisy economic scenario, as there are a lot of concerns as to whether or not economies will truly open up, or if it is a scenario where we are just going to get a short-term pop, only to turn right back around.
Beyond that, central banks around the world continue to print money as fast as they can, so that does drive up the “precious metals trade” as a way to protect against financial losses in that environment. The interest rates are still extremely low around the world, but if and when that gives way, this market could shoot straight up in the air. In the meantime, I believe that the 50 day EMA offers enough psychological support that we will probably go looking towards the $1750 level. I believe that there is a resistance barrier that extends to the $1760 level, and once we get above there it is likely that we go looking towards the $1800 level after that. I do think that happens given enough time, and that we then go looking towards the $2000 level.
· Gold to see $5,000-$9,000 price levels in 10 years - In Gold We Trust Report
The yellow metal could be looking at nearing the $5,000 an ounce price tag in a decade and that is a conservative estimate, according to the annual In Gold We Trust Report published by Incrementum AG.
The 14th annual report made some pretty bold predictions for the gold market, forecasting prices to, at least, approach $5,000 an ounce and possibly even push towards $9,000 an ounce by 2030, Incrementum AG fund managers and authors of the report Ronald-Peter Stoeferle and Mark Valek wrote on Wednesday.
The difference between whether gold will be near $5,000 an ounce or $9,000 an ounce will depend on the global debt situation as well as inflation.
“The proprietary valuation model shows a gold price of USD 4,800 at the end of this decade, even with conservative calibration. Should money supply growth develop in a similar inflationary manner to that of the 1970s, a gold price of USD 8,900 is conceivable by 2030,” the report stated.
But after the COVID-19 outbreak, the world will be facing a global debt crisis.
According to the report, inflation concerns start to come in as well, which sees inflation as the “dominant investment theme” for the coming years.
“Central banks are in a quandary when it comes to combating future inflation. Due to overindebtedness, it will not be possible to combat nascent inflation with substantial interest rate increases,” Stoeferle and Valek said.
This is all great news for gold because it means that real interest rates will have to remain in the negative territory for a long time. Silver and mining stocks also look to benefit from this, the report added.
Gold could also potentially overtake the role that government bonds play in a portfolio as unsustained debt levels bring into question many government bonds out there.
“The interventions to combat the pandemic are overstretching the debt sustainability of many countries. Government bonds will increasingly be called into question as a safe-haven. Gold could take on this role,” the report said.
· Palladium rose 0.4% to $1,943.34 per ounce and platinum gained 1.4% to $830.21, while silver inched down 0.1% to $17.29.
Reference: FX Empire, FX Street, Kitco
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