Good morning traders, 

Gold prices closed at 1,927.72, after placing a high of 1,937.51 and a low of 1,914.30. Overall, the movement of gold remained flat throughout the day. Prices for the precious metal fell on Tuesday, for the third consecutive session, but losses eased after the expectations of a dovish speech by the Federal Reserve Chairman, Jerome Powell. On Tuesday, gold remained flat, closing the day at the same level on which it started, at $ 1,927.

The downfall in gold was due to the improved risk sentiment, because of the potential coronavirus vaccine and positive signals on the US-China trade front. The stronger equity market raised the risk sentiment and distracted the investors from the yellow metal prices, towards more risky assets. Hopes about the development of a vaccine and its distribution worldwide, after a statement released by the World Health Organization (WHO) on Monday, raised renewed optimism in the market, helping the risk sentiment.

The WHO said that 172 countries and multiple candidate vaccines were engaged in talks to potentially participate in the COVAX facility, that would ease the global access to a COVID-19 vaccine. The COVAX facility is an initiative aimed at working with vaccine manufacturers to provide worldwide equitable access to safe and effective vaccines that are licensed and approved. Nine candidate vaccines have already joined the initiative, and a further nine are under evaluation. Meanwhile, conversations with the major producers are also underway.

The Prime Minister of Sweden, Stefan Lofven, said that equal access to a virus vaccine would work as a key to beat the virus and pave the way for recovery from the pandemic. He added that the development of a vaccine should not be a race between a few winners, and the COVAX facility has provided a solution for this by making sure that all countries could benefit from access to the world’s largest portfolio of vaccine candidates, along with the equal distribution of vaccine doses.

This raised hopes for a quick economic recovery and helped risk sentiment, weighing on gold prices. The yellow metal was also under pressure, as investor confidence was boosted by the reaffirmation of commitment toward the Phase 1 trade deal by Beijing and Washington. A telephone call between US trade representative Robert Lighthizer, US Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He was held on Tuesday.

Since early May, the first formal dialogue between both sides was held on Tuesday, on the back of concerns that the deal could be on shaky ground, as ties between the US and China have weakened. This call was originally expected on August 15, six months after the launch of the trade deal.

The relations between Washington and Beijing have not been great lately, as both countries have trade sanctions in place, and there are issues with new national security laws imposed on Hong Kong, the disputed territorial claims by China in the South China Sea, and the national security threats posed by Chinese tech firms.

The positive news about the confirmation of the commitment from both sides, towards the Phase 1 trade deal, despite the ongoing tensions, helped the risk sentiment and weighed on gold prices.

Investors are now waiting to see if the US Federal Reserve will tolerate inflation and put economic growth over monetary growth, as Fed Chair Jerome Powell is expected to speak at a gathering of central bankers in Jackson Hole on Thursday. The speech is expected to give clues about the US Federal Reserve’s efforts to revamp its monetary policy approach. However, these hopes that the Fed will provide a dovish speech gave a boost to gold prices in the late session, and the yellow metal recovered all of its daily losses, ending the day at the same level on which it started, at $ 1,927 per ounce.

On the data front, at 19:00 GMT, the CB Consumer Confidence figures showed a decline in August, to 84.8 compared to the expected 93.0 and the previous 91.7. This weighed on the US dollar and helped gold recover its losses from early in the day.

Daily Technical Levels:

Support Resistance

1,922.39 1,946.49

1,909.07 1,957.27

1,898.29 1,970.59

Pivot point: 1,933.17

Gold prices are trading with a bearish bias, at the 1,921 level, after having violated the triple bottom support level of 1,92. Closing of candles below the 1,925 level suggests the odds of a selling trend in the precious metal, and it may trigger selling until the next support area of 1,914. Selling bias seems dominant; therefore, violation of the 1,914 level could lead gold prices towards levels around 1,888. Good luck!