Daily Brief, May 22: Everything You Need to Know About Gold on Friday

Posted Friday, May 22, 2020 by
Arslan Butt • 3 min read

Happy Friday, traders.

The precious metal gold prices closed at $1727.01 after placing a high of $1748.67 and a low of $1717.21. Overall the movement of GOLD remained bearish throughout the day. On Thursday, prices fell about more than 1.5% to a one-week low level on the back of growing fears of economic fallout and its impact on poor-income households. Another factor involved in the downfall of gold prices on Thursday could be better than expected PMI data from the US.

Furthermore, the growing tensions between the US & China and doubts on economic recovery made investors switch from the safe-haven into more risky investments. The latest blame from the US on China for meddling into US elections added to the ongoing tensions between the two countries. On Wednesday, Trump claimed that China was desperate to see him lose the elections this year. He wrote in a tweet that China was on a massive disinformation campaign to make sure Trump could not win the presidential race but instead wanted sleepy Joe Biden to win it.

He added that China wanted to rip off the United States as they have been doing for decades until he came along. In response to what Mark Zuckerberg, the founder of Facebook, announced on Thursday that this time Facebook would stop interference in US elections. He admitted that Facebook was behind during the 2016 elections in which Donald Trump won.

Zuckerberg said that he did not want other governments to try to interfere in elections. He described preventing electoral interference as a little bit of an arms race against countries like Russia, Iran, and China. This news escalated the prevailing tensions between the two biggest economies of the world and increased the risk appetite and weighed on gold prices.

On the other hand, on Thursday, the Chairman of Federal Reserve, Jerome Powell, said that the economic fallout from the coronavirus pandemic was reducing, and it would affect the poor Americans more. He added that the economic downturn due to the coronavirus crisis was sudden and severe, which erased all of the job gains from the past decade.

Powell explained that the economic burden was though widespread, but it was not evenly spread, and those Americans who were facing the impact of economic fallout were those who were least able to bear it. This means the low-income households of the United States were mostly affected due to the lockdown restrictions induced because of the virus spread.

Earlier this month, Powell said that the economic path ahead would be highly uncertain and risky. Public confidence over the reopening of activities would be the key for rebound. He asked the participants of the meeting how they were thinking about the future and how their communities were coping with the situation. He stressed the need for feedback for conducting interest rate policy.

On the data front, the Philly Fed Manufacturing Index for the month of May declined by 43.1 against the expected decline of 40.0 and weighed on the US dollar. At 17:30 GMT, the Unemployment Claims from the US for the past week exceeded the expectations of 2400K and were released as 2438K.

However, at 18:45 GMT, the closely watched Flash Manufacturing PMI from the US exceeded the expectations of 39.3 and was reported as 39.8 during the month of May and supported the US dollar. The Flash Services PMI for May also supported the dollar by releasing as 36.9 against the expected 32.6. At 19:00 GMT, the CB Leading Index for the month of April declined by 4.4% against the expected decline of 5.5% and supported the US dollar. The Existing Home Sales for April came in line with the expectations of 4.31M. Most data came in favor of the US dollar and made it strong against other rival currencies and dragged the yellow metal prices.

Daily Technical Levels
Support Resistance
1744.86 1758.46
1737.63 1764.83
1731.26 1772.06
Pivot Point: 1751.23

Gold slipped sharply from 1,740 to 1,717 support level, which was extended by the upward trendline on the 4-hour timeframe. Bullish trend continuation may drive buying until 1,745 level and even higher towards 1,754 level while bearish breakout of 1,717 level can open further room for buying until 1,708 level. Odds of bullish bias remains strong today.

Good luck!

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