Price of Gold Fundamental Daily Forecast – Traders Chasing Hong Kong Headlines

James Hyerczyk

Gold prices are moving higher on Thursday after a seven-day setback as tensions between the United States and China over a proposed Hong Kong security law escalated, while fresh monetary and fiscal stimulus measures from India, Japan and the Euro Zone to mitigate the coronavirus fallout also lent support.

At 12:31 GMT, August Comex gold is trading $1737.90, up $11.10 or +0.64%.

Unlike earlier in the week, gold buyers aren’t shying away from the long-side despite higher equity prices. As far as I know, there is still optimism in the air over the reopening of global economies and progress being made toward a vaccine to stop coronavirus. These are the two factors traders blamed for gold’s decline this week.

Did something change? Even the reaction to fresh stimulus measures from Europe and Japan is a bit of a surprise since these ideas have been out there for over the week. Furthermore, we can’t be sure yet if we’re looking at short-covering or new buying. After all, recent data showed many professionals trimming long gold positions in recent weeks and some actually shorting the precious metal.

The point I’m trying to make is that gold is expected to trade at heightened volatility levels over the short-term, but there is enough stimulus out there to provide a cushion for long-term investors.

We continue to have a longer-term upside bias, but we do realize that over the short-run, due to the ever-changing headlines, gold is going to have experience unexpected price swings.

If you’re a gold trader then you’re going to like the volatility. If you’re an investor than you’ll have to ride out the price swings, however, with a two-sided trade, there’s a better chance of a pullback into a major value zone.

The Headlines

Gold traders appear to be reacting to two narratives today:  Hong Kong and fresh stimulus.

As far as Hong Kong is concerned, most of the headlines appear to be coming from the United States. China has been merely responding to U.S. comments although we’re not sure if they have been official comments.

U.S. Secretary of State Mike Pompeo said Hong Kong no longer qualifies for its special status under the U.S. law, dealing a blow to its status as a financial hub. Additionally, U.S. President Donald Trump has a long list of possible responses to China’s to impose a national security law on Hong Kong, including visa and economic sanctions, said David Stilwell, assistant Secretary of State for East Asia.

China has basically said it may respond with sanctions of its own when provoked to do so.

As far as fresh stimulus is concerned, the European Union unveiled a 750 billion Euro ($826.13 billion) plan on Wednesday. Japan approved a fresh $1.1 trillion stimulus package also and India may need to pump about $20 billion into its struggling economy.

In U.S. economic news, Preliminary GDP fell 5.0% versus 4.8%. Core Durable Goods plunged 7.4%, better than the -14.8% forecast. Durable Goods Orders fell 17.2%, also better than the -19% estimate.

Weekly Unemployment Claims were a dismal 2.213 million. This was worse than the 2.100 million forecast. The previous week was also revised lower to 2.446 million.

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

This article was originally posted on FX Empire