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James Hyerczyk
Gold

Gold posted a two-sided trade last week before closing lower. The chart pattern is nothing to be alarmed about and something we’ve seen before. The market seems to be getting overheated in the short-run by excessive buying and conflicting headlines, but the longer-term fundamentals remain intact, providing the major support.

Last week, August Comex gold settled at $1753.50, down $14.50 or -0.82%.

On Monday, the market surged to $1787.70, its highest level since the $1789.00 main top on April 14, before posting a dramatic technical reversal to the downside. The moves were driven by news headlines.

Spot gold rose on Monday to its highest level since October 2012 as worries regarding the souring U.S.-China relations and bleak U.S. economic underpinned the safe-haven metal.

Among the stories helping to boost prices were concerns over the U.S.-China ‘Phase I” trade deal reached in January. Concerns were raised after President Donald Trump recently said that he was not “thrilled’ with the agreement.

Meanwhile, China’s commerce ministry last Sunday said it was firmly opposed to the latest rules by the United States against Huawei and would take all necessary measures to safeguard Chinese firms’ rights and interests.

Gold prices retreated from their highs as stocks and crude oil surged on optimism surrounding the trial of a potential COVID-19 vaccine.

Late in the week, gold prices plunged again as the U.S. Dollar firmed on hopes for a quick economic recovery dented bullion’s safe-haven appeal. However, prices rose again on Friday after the U.S. threatened China over the passing of new security measures in Hong Kong.

Weekly Forecast

Expect the same choppy, two-sided trade over the short-run as investors react to headlines over the coronavirus economic recovery, coronavirus vaccines, U.S.-China trade relations and safe-haven demand for the U.S. Dollar. Essentially, it’s just the major players making a market. Meanwhile, the longer-term investors remain in place to take advantage of any steep breaks into value areas.

Longer-term, the enormous amount of monetary stimulus in the system, the need for that to continue for some time and the inflation risk are all bullish for gold.

Last week, U.S. Federal Reserve policymakers even acknowledged the possibility of further support measures if the economic downturn persists, the minutes from their latest policy meeting showed.

Traders should also keep an eye on Preliminary U.S. GDP data on Thursday and a speech from Fed Chair Jerome Powell on Friday.

For a look at all of today’s economic events, check out our economic calendar.

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