Daily Brief, Sept 09 – Everything You Need to Know About Gold

Posted Wednesday, September 9, 2020 by
Arslan Butt • 2 min read

Good morning traders,

The GOLD prices closed at 1,931.04, after placing a high of 1,940.91 and a low of 1,906.41. Overall, the movement of prices for the yellow metal remained flat yet bullish throughout the day. Gold prices dropped to the lowest level in nine days in the first trading session on Tuesday,  due to the strong US dollar. The greenback has seen an unexpected rise during the past week, on the back of a weakened Euro, ahead of the European Central Bank meeting.

The US Dollar Index, which measures the greenback’s value against six major currencies, rose by 0.8%, almost reaching 93.468. The 10-year US Treasury note fell by 5.4%, making the rise of the US dollar more notable.

On Thursday, the ECB will hold its monetary policy meeting, and most analysts don’t expect any change in its policy, but they are waiting for the bank’s message on inflation forecasts nevertheless. Market traders are also waiting to determine whether the Euro is stronger than they thought. At the beginning of the month, the Euro marked a 2-year high, above the 1.20 level, until ECB Chief Economist Philip Lane raised concerns about the higher prices. A sharp drop in the Euro, which is a rival of the US dollar, caused the US dollar to rise by 0.7% against its rivals, but despite the strong US dollar, the gold prices also rose on Tuesday.

Meanwhile, a sharp sell-off in technology stocks, coupled with the uncertainty surrounding the Brexit and the second wave of coronavirus infections, kept the global equity markets under pressure. However, gold drew support from the uncertainties mentioned above and rose on Tuesday.

The precious metal has risen by over 27% this year, after central banks across the globe flooded markets with the extraordinary stimulus packages, to offset the economic damage caused by the coronavirus pandemic. Moreover, President Donald Trump said that he intended to curb America’s economic ties with China. He also threatened to punish any American companies that create jobs overseas, if they do business with China.

On Monday, at the White House news conference, the president said that the critical manufacturing supplies would be produced in the United States in future. He also said that “made in America” tax credits will be created, and the jobs will be brought back to the United States. He warned that tariffs would be imposed on companies that force America to create jobs in China and other countries.

These remarks by Trump caused further escalation of the tensions that already exist between the world’s two biggest economies, and weighed on the market sentiment, therefore  helping the gold prices to move upward.

On the data front, the NFIB Small Business Index came in at 100.2, against the expected 99.0, lending support to the US dollar and capping any further gains in the yellow metal on Tuesday. Simultaneously, the IBD/TIPP Economic Optimism decreased to 45.0 from the projected 47.3, weighing on the US dollar and boosting gold prices on the day.

Daily Technical Levels

Support             Resistance

1,920.50            1,957.10

1,897.80            1,971.00

1,883.90            1,993.70

Pivot Point:      1,934.40

Gold prices gained support, amid a sell-off in US stocks, especially Amazon, Apple, Microsoft, and Facebook. GOLD prices are now trading sideways, at around 1,927, with immediate support at 1,922 and resistance at 1,935. On the higher side, the XAU/USD may find the next resistance at levels around 1,942, with a breakout at 1,935. Conversely, a bearish breakout at the 1,922 level may lead gold prices towards the 1,917 and 1,910 levels. Good luck!

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