Daily Brief, May 29: Safe Haven Gold Under Pressure – Downward Channel Weighs
Arslan Butt • 2 min read
Happy Friday, traders!
The long term forex trading signal on gold managed to secure 80 green pips for us. A day prior, the yellow metal prices closed at $1717.99 after placing a high of $1727.53 and a low of $1704.93. Overall the movement of gold remained bullish throughout the day.
On Thursday, GOLD prices stayed above the level of $1700 on the back of another rise in weekly unemployment numbers issued by the United States. Because of COVID-19, a total of 41 Million Americans have become jobless now. After the coronavirus pandemic almost crippled the US economy from the previous nine weeks, 39 million people lost jobs. The US Labor Department said on Thursday that last week, over 2.1 million Americans applied for jobless claims, which made a total of 41 million jobless people in 10 weeks.
Meanwhile, all the 50 states of the United States have reopened most of their economies over the past couple of weeks. However, people were still afraid of the second wave of infections, which has made them hesitant to work and conduct economic activities like before. This hesitation from people has made non-essentials’ businesses to continue losing customers and employees, hampering the economic recovery.
Another factor driving the rise in gold prices was the escalating US-China tensions when US Secretary of State Mike Pompeo said that Washington no longer certifies Hong Kong as an autonomous territory from China because on Thursday the Beijing’s National People’s Congress passed the security legislation on Hong Kong.
Furthermore, the US House of Representatives approved the legislation for sanctions on Chinese officials responsible for the oppression of Uighurs Muslims in the Xinjiang province of China. On Wednesday, the Uighur Human Rights Act was passed by a 413-1 vote in the Senate. The bill was then sent to the White House for President Donald Trump to veto or sign into law.
All these tensions heightened the dispute between the US and China and raised the bars for the cold war between the two biggest economies of the world. The uncertainty regarding Sino-US relations gave a push to safe-haven gold in the market on Thursday. On the other hand, the potential vaccine developments from different countries kept a lid on the additional gains in gold prices.
On the data front, the Prelim GDP for the quarter from the United States reduced to 5.0% against the forecast decline by 4.8% and weighed on the US Dollar. The Pending Home Sales for April also declined by -21.8% against the expected decline of -15% and weighed on the US dollar. Poorer than expected economic data from the US weighed on the US dollar and raised gold prices on Thursday.
Daily Technical Levels
Pivot point: 1715.37
The yellow metal is trading bullish around 1,721, but recently it’s been facing stiff resistance around 50 EMA on the 4-hour chart. Gold is likely to close below 50 EMA resistance, which holds around 1,725 area. Above this, the next resistance is likely to be found around 1,733 level. While retracement can be seen below the 1,721 level until 1,712 level. Let’s keep an eye on the 1,721 level today.