Daily Brief, Sept 07 – Everything You Need to Know about Gold on Monday!
Arslan Butt • 3 min read
Good morning traders,
Prices for the precious metal, gold, closed at 1,933.22, after placing a high of 1,948.31 and a low of 1,916.41. Overall, the movement of gold remained flat throughout the day. On Friday, gold prices fell further, to below the 1,920 mark, as the market risk sentiment improved. The hopes of economic recovery were also better, on the basis of the US job data, weighing on the prices for the yellow metal.
The stage for the weak gold prices was set by the US 10-year Treasury note, which jumped to 15% on Friday. The US Dollar Index was also up on Friday, which helped push the yellow metal below the 1,920 level.
However, the losses in gold were somehow recovered in the late American session, resulting in a flat daily movement for gold on the last day of the week. The main driver of the precious metal was the rebounding US dollar, which raised hopes for economic recovery and decreased the appeal of safe-haven assets.
On Friday, the highly awaited US job data was released at 17:30 GMT. The figures indicated that the Average Hourly Earnings for August had risen to 0.4%, against the expected 0.0%, lending support to the US dollar, and ultimately weighing on the yellow metal. The Non-Farm Employment Change from the US Labor Department suggested that the US had created almost 1371K jobs in August, as expected, and this positive news boosted the US dollar. The high number of jobs created raised hopes that US economic recovery will move on the upside track for now, and the impact of the coronavirus crisis will eventually fade away. These hopes weighed on the safe-haven metal, hence the drop in the gold price to the 1,916 level.
In August, the Unemployment Rate from the United States also favored the local currency, when it dropped to 8.4% from the projected 9.8%, adding further pressure to the yellow metal prices. Furthermore, the positive Jobs data from the United States also raised questions about whether the US Congress will announce another stimulus package now. These concerns also helped the US dollar to find demand and put added pressure on the yellow metal.
As we already know, no progress has been made between the Republicans and the Democrats, as yet, in terms of the latest economic aid bill. However, both parties have agreed on the need for a new tranche of stimulus checks worth $ 1,200 per individual adult. But, consensus has yet to be reached on many other issues, like funding for states and schools, unemployment benefits, and above all, the financial layout of the proposed stimulus package.
In May, the Democratic House of Representatives passed a $ 3.4 trillion HEROES Act, but the proposal failed to get a pass on the floor of the Senate, as it was a huge amount. The Republicans countered with a proposed HEALS Act, worth $ 1 trillion, which also failed, as Nancy Pelosi said that the bill fell short of the American people’s needs.
The opposing sides then held talks, in which Pelosi offered to drop the overall funding demand to $ 2.2 trillion, while the Chief of Staff, Mark Meadows, said that the Republicans were ready to add $ 300 billion to their initial offer, bringing it up to $ 1.3 trillion.
US Vice President Mike Pence said that US President Donald Trump favored providing a second round of direct payments to US citizens. The US Senate will resume on Sept. 08, with the House getting back to work on Sept. 14.
Pelosi has made it clear that anything less than $ 2.2 trillion will not be accepted, and this has stalled the release of the next stimulus package. However, on Sunday, the US Secretary, Steven Mnuchin, said that US President Donald Trump believed the American economy could use another jumpstart, in the form of a COVID-19 stimulus package. He said that new, more targeted proposals would roll out this week, likely to the tune of about $ 500 billion. He also added that the direct payment checks to Americans had not been included in the latest proposals.
Apart from this, the Chinese government has stopped renewing press credentials for foreign journalists working for American press organizations in China. They have also implied that they will proceed with expulsions if the Trump administration takes any further action against Chinese media employees in the US.
The tensions between the two countries continued to escalate, helping the yellow metal prices to recover their daily losses on Friday, and to move upward in the late American session. Meanwhile, another factor that helped the gold prices to regain strength on Friday was the rising number of coronavirus cases in the US. Out of the 50 states in the country, the number of confirmed cases rose in 22 states.
Daily Technical Levels
Pivot point: 1,940.87
Gold prices continue trading sideways, around the 1,935 level, with immediate support at around 1,930 and resistance at the 1,940 level. A bullish breakout could lead gold prices towards 1,979, and a bearish breakout could pull them down towards 1,910. We can expect choppy trading today, due to US bank holidays, in the wake of labor day celebrations. A neutral bias prevails in the market today.