Gold eases after Trump’s discharge, weaker dollar cushions decline
· Gold prices dipped on Tuesday, as equities gained following U.S. President Donald Trump’s discharge from hospital after treatment for a coronavirus infection, though a softer dollar limited losses.
· Spot gold fell 0.1% to $1,910.68 per ounce by 0512 GMT. It had hit $1,918.36 on Monday, its highest since September 22.
· U.S. gold futures were down 0.2% at $1,917.
· The market is still in a bit of a risk-on mood right now and that’s tempering gold, said Stephen Innes, chief market strategist at AxiCorp.
· Asian stock markets rose to a two-week high after the U.S. president returned to the White House from hospital following treatment for Covid-19 and on rising prospects for a fresh U.S. stimulus package.
· However, the severity of Trump’s illness has been the subject of intense speculation.
· U.S. House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin were preparing to continue talks on the new coronavirus relief package again on Tuesday. Gold was also weighed down by mild profit-booking, analysts said.
· “Given that U.S. dollar index is falling, this will likely support gold prices and cushion the downside,” said Margaret Yang, a strategist with DailyFx that covers currency, commodity and index trading.
· “Overall trend (in gold) has turned bullish ... $1,910 will be a critical support level at the moment.”
· Gold looks to the upside ahead of Powell’s speech
Gold has been on the rise, holding above $1,900 amid hopes for a further cash injection from the government. XAU/USD’s path of least resistance is up ahead of Powell’s speech as technical set up points to the additional upside, FXStreet’s Dhwani Mehta reports.
Speech by the US Federal Reserve (Fed) Chair Jerome Powell will be eyed, as he is due to speak about the US economic outlook at the National Association of Business Economics annual meeting.
“Gold looks to extend Monday’s rally, having carved out a potential bull flag formation on the hourly chart. A bull flag is a bullish continuation pattern, with the validation likely to occur on an hourly closing above the falling trendline resistance at $1913.51. The pattern target is measured at $1940. The hourly Relative Strength Index (RSI) has turned lower but holds well above the midline, at 53.11, allowing for more upside.”
“To the downside, the falling trendline support at $1906.51 is likely to offer an immediate reprieve to the bulls. A break below which the $1900 mark will be put at risk.”
· The World Gold Council (WGC) noted that the official sector demand has slowed during the first half of 2020 as fewer central banks added to their gold reserves. The WGC noted that net purchases fell 39% to 233 tons during the first half of 2020 as compared to the same period a year ago.
"Despite the lower level of growth in global official gold reserves in July, year-to-date central banks' net purchases remain comfortably above 200 tonnes," the WGC in the report.
· Central banks could be stepping up gold purchases after 2020 pause
Central banks around the world are likely to re-engage with gold purchases in 2021 after this year's pause, according to several banks and research firms.
The official sector's gold purchases reached record levels in 2018 and 2019, seeing a total of 656 and 667 tons bought respectively.
* Gold demand from the official sector is looking to end 2020 at just 375 tons — the lowest level in a decade, said Citigroup in a September report. In 2021, that total could recover to 450 tons, Citi added.
"The broader push to buy gold is clear amid a longer-term de-dollarization trend and a bias toward reserve diversification," according to Citi's head of commodities for North America Aakash Doshi.
Russia, which stopped being a major gold buyer this year, may resume its purchases in the spring of 2021, and China, which has not revealed anything new in nearly a year, could be looking at new purchases as soon as the U.S. election is over, Citi's report added.
* HSBC Securities (USA) Inc. projects a recovery to 400 tons in 2021 after a drop to 390 tons this year, Bloomberg reported.
* Standard Chartered sees central banks remaining net buyers this year with 417 tons while projecting a slight decline to 400 tons in 2021.
· Among other precious metals, silver fell 0.4% to $24.26 per ounce, palladium dipped 0.5% to $2,350.84, while platinum was down 0.3% at $893.97.
Reference: CNBC, Kitco, FXStreet,
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