Daily Brief Aug 24 – Everything You Need to Know About Gold!
Arslan Butt • 3 min read
Good morning traders,
Welcome back to another exciting week. Last week, the gold prices closed at 1,939.89 after placing a high of 1,955.88 and a low of 1,911.47. Overall the movement of gold remained bearish throughout the day.
GOLD fell by about 1.6 % on Friday, as the US dollar rebounded, causing a decrease in the demand for bullion. Prices for the precious metal posted losses for the second consecutive week on Friday. The US dollar has gained much ground in the past few days, and has been weighing on gold prices since then. On Friday, the US Dollar Index (DXY) rose by about 0.5%, to 93.25, putting pressure on gold prices, and resulting in a decline in the value of the yellow metal.
Gold also took a knock after the release of the minutes of the US Federal Reserve meeting for July, which were released on Wednesday. The Fed minutes showed that the Fed had dismissed the notion that it should exert controls over the yield curve.
The US dollar has been receiving continuous support from the US home sales and PMI data that was released on Friday. AT 18:45 GMT, the Flash Manufacturing PMI from the US rose to 53.6, compared to the anticipated 51.9, supporting the US dollar. The Flash Services PMI for August have also exceeded the expectations of 50.9, coming in at 54.8. At 19:00 GMT, the Existing Home Sales in July also surged to 5.86M, in contrast to the estimated 5.40M, supporting the US dollar.
The better-than-expected US macroeconomic data helped the US dollar to gain traction against a basket of six major currencies. It remained at the 93 handles throughout the day, and kept weighing on the gold prices.
Meanwhile, the escalating tensions between the US and China and the US and Iran remained supportive of bullion, keeping the losses in gold prices limited for the day.
On Friday, the China Banking and Insurance Regulatory Commission (CBIRC) issued a stern warning to Washington, stating that any US actions to undermine financial stability in Hong Kong will not be only against the Chinese people, but that it would also have consequences for the people of the world, including the Americans themselves. They advised the US not to act unilaterally, only to shoot itself in the foot.
The Chairman of the CBIRC, Guo Shuqing, said that the US had placed domestic laws, that lack legality and violate the principles of the market economy, above international laws.
Furthermore, the Trump Administration denied acknowledging any plans to meet China over the Phase 1 trade deal. This came in after the commerce ministry spokesman, Gao Feng, had announced that the US and China would hold bilateral talks in the coming days, to evaluate the progress of the agreement.
Besides this, US President Donald Trump said on Friday, that if he won the upcoming elections, he would willfully end the country’s reliance on China. He said that he would ensure the full recovery of American manufacturing independence and bring home the critical supply chains, in order to end the USA’s reliance on China permanently.
Meanwhile, almost the entire UN security council united against the US for attempting to extend the economic sanctions against Iran. It should be noted that 13 out of 15 security council members opposed Trump’s administration when US Secretary of state Mike Pompeo declare Iran to be in non-compliance with a 2015 nuclear deal.
The 2015 nuclear deal with world powers aimed at stopping Tehran from developing nuclear weapons, in return for sanctions relief. But in 2018, US President Donald Trump called this deal the worst deal ever and ended the US participation. Almost every council member has issued letters that mention that the US has no standing right to trigger these sanctions, as it exited the Joint Comprehensive Plan of Action (JCPOA) in 2018. These ongoing geopolitical tensions remained supportive of the gold prices and kept a check on further losses.
Daily Technical Levels
Pivot point: 1,942.92
On Monday, GOLD is trading at the 1,933 level, and it continues to trade sideways in a descending triangle pattern that provides support at $ 1,924 and resistance at $ 1,947. Closing of candles below the 1,924 level could drive a selling bias in the market, until levels of 1,911 and 1,888. At the same time, a bullish breakout of 1,942 could extend the buying trend until the 1,953 level. Good luck!