Daily Brief, October 06 – Everything You Need to Know About Gold!
Arslan Butt • 3 min read
Good morning traders,
Prices for the precious metal, gold, closed at 1,913.31, after placing a high of 1,918.77, and a low of 1,887.07. Overall, the movement of gold remained bullish throughout the day. The prices for the yellow metal edged up on Monday, due to the weakness of the US dollar, but the gains in gold were nevertheless limited, due to the risk sentiment in the market. This risk sentiment was supported by the news that US President Donald Trump, who is being treated for a coronavirus infection, could be released from hospital soon.
The global stocks rose on Monday, after the news that Trump could be discharged from the hospital, despite external experts warning that his case might be severe. The US Dollar Index fell by 0.2% against its rival currencies, making the yellow metal strong in the market.
Meanwhile, the focus is still on the next round of US stimulus measures for helping the economy through the pandemic-induced crisis. Gold prices have gained about 25% this year, supported by massive stimulus measures by central banks and governments worldwide, as gold is often used as a hedge against inflation and currency debasement.
Furthermore, investors are also considering the upcoming US Presidential elections that are due to start on November 03, which are providing strength to the yellow metal, whereby the focus remains on the coronavirus aid package. In the coming months, the chances that Joe Biden could win the election would probably drive the gold prices.
On the data front, the ISM Services PMI for the United States was released, showing a rise to 57.8 in September, compared to the projected 56.3 and the previous 56.9, and lending support to the US dollar. The positive PMI data from the United States showed that the services sector performed well during September, and was expanding. This news lifted the local currency, the USD, and capped any further gains in the gold prices on Monday.
Another reason behind the rise in the yellow metal prices was the declining US dollar, due to the rise in riskier assets. The US Treasury yields rose, following the substantial gains in European yields, which increased due to the stronger-than-expected EU Retail Sales report on Monday. The August report for EU Retail Sales came in at double the expected rate, raising EU yields.
Moreover, the chances of a second wave of the coronavirus worldwide during the winter season are increasing day by day, as the number of coronavirus infections all over the world are increasing day by day. Europe is strugglingd hard to contain the rise of coronavirus cases, with France reporting nearly 17,000 new cases, and fresh measures being introduced in Paris, including the closing of bars and the imposition of new sanitary protocols in restaurants. Canada reported 2,206 new COVID-19 – the highest daily count so far, and Oman also reported a rise in the number of coronavirus cases, with the total cases there surpassing the 100,000 mark. In Michigan, coronavirus cases were up to nearly 129,000.
The rising number of coronavirus cases globally raised fears of a second wave of COVID-19 in winter, and this also helped the safe-haven yellow metal to post gains on Monday.
Pivot point: 1,911.48Trading in the precious metal, gold, continues to be neutral, at the 1,911 level, and the closing of candles above the 1,908 level is likely to support the precious metal today. Closing the candle below the 1,908 level is likely to drive more selling, until levels around 1,900, while the bullish breakout of 1,917 resistance may determine the next trend in the market. The bearish bias remains solid, below 1,908, and above this, trading in gold could be bullish. Good luck!
About the author
Arslan Butt is our Lead Commodities and Indices Analyst. Arslan is a professional market analyst and day trader. He holds an MBA in Behavioral Finance and is working towards his Ph.D. Before joining FX Leaders Arslan served as a senior analyst in a major brokerage firm. Arslan is also an experienced instructor and public speaker.