Gold steady as markets brace for next salvo in trade war

Gold has inched lower on the Wednesday session. In North American trade, the spot price for one ounce of gold is $1274.11, down 0.06% on the day. On the release front, the U.S current account deficit narrowed to $124 billion, beating the forecast of $129 billion. As well, Existing Home Sales dropped to a 3-month low. The reading of 5.43 million was well shy of the estimate of 5.52 million. On Thursday, the U.S releases manufacturing and employment reports.

In times of crisis, nervous investors often turn to gold, a safe-haven asset. However, since the start of the new round of tit-for tat tariffs between China and the U.S began on Friday, gold has defied expectations and lost ground. The base metal has declined 2.2% since Friday, as the U.S dollar has flexed is muscles against gold as well as other major currencies.

Investor risk appetite has waned this week, as the nasty trade war rhetoric between the United States and China continues to worsen. There are growing fears of a global trade war, which would take a toll on the global economy and could trigger a worldwide recession. The most recent round of the trade spat between China and the U.S started on Friday, when the U.S announced a 25 percent tariff on $50 billion in Chinese goods. After China responded with an identical move on U.S. imports, President Trump shook up the markets after he threatened to impose a 10 percent tariff on some $200 billion in Chinese goods. Not surprisingly, China has threatened to retaliate to this latest move. Trump has vowed to take action on the $375 billion trade deficit that the U.S has with China, claiming that the latter is guilty of unfair trade practices. With the first of the U.S tariffs scheduled to take effect on July 6 and no signs that either side will blink first, traders should be prepared for further volatility in the markets.

 

XAU/USD Fundamentals

Wednesday (June 20)

  • 8:30 US Current Account. Estimate -129B. Actual -124B
  • 9:30 Fed Chair Powell Speaks
  • 10:00 US Existing Home Sales. Estimate 5.55M
  • 10:30 US Crude Oil Inventories. Estimate -2.6M

Thursday (June 21)

  • 8:30 US Philly Fed Manufacturing Index. Estimate 28.3
  • 8:30 US Unemployment Claims. Estimate 220K

*All release times are DST

*Key events are in bold

 

XAU/USD for Wednesday, June 20, 2018

XAU/USD June 20 at 11:45 DST

Open: 1274.85 High: 1276.50 Low: 1271.17 Close: 1274.22

 

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1220 1236 1260 1285 1307 13322

XAU/USD showed little movement in the Asian session. In European trade, the pair edged lower but then recovered. XAU/USD has ticked lower North American trade

  • 1260 is providing support
  • 1285 is the next resistance line
  • Current range: 1260 to 1285

Further levels in both directions:

  • Below: 1260, 1236, 1220 and 1204
  • Above: 1285, 1307, 1322 and 1337

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