2020-10-05 • Updated
The yellow metal is boosted by the poor performance of the USD. What is the forecast?
On Friday, US President Donald Trump announced that he had been positively tested on Covid-19. As a result, the market sentiment deteriorated immediately. Then, the downbeat NFP came out, driving safe-haven currencies to the upside, especially the Japanese yen and the US dollar.
However, today investors have been encouraged by optimistic comments on Trump’s recovery, their confidence strengthened. Consequently, the greenback waned and gold rose. Indeed, the main driver of XAU/USD is the dollar, which is quite volatile amid upcoming presidential elections, which are scheduled for November 3. Besides, continuing fiscal stimulus talks weigh on the market sentiment. Republicans argue for $1.5 trillion, while Democrats insist on $2.2 trillion.
“There is need for new stimulus measures to rally (gold) prices. Without this mojo, there are signs of fatigue creeping into precious metals,” according to Phillip Futures.
Gold has approached a key resistance of $ 1910. This level was acting as strong support since August, but now it plays a role of resistance. If it manages to break it, the doors towards the upper trendline at $1 920 will be open. The way above $1 920 will confirm further bullish momentum and drive the yellow metal upwards to a high of early August at $1 940. On the flip side, if it falls below the key psychological mark of $1 900, the way to September’s dips of $1 850 will be clear.
China has issued new oil product export quotas to allow oil companies to send surplus barrels overseas, particularly Sinopec, which has the highest volume among quota holders. While the exact quota volume remains undisclosed, oil companies are forecasted to export approximately 3.5 million metric tons of clean oil products in September, a 10% increase from August.
Thanks to the incredible advancements in horizontal drilling and fracking technology, the United States has experienced a mind-blowing shale revolution. They've become the heavyweight champion of crude oil production, leaving Saudi Arabia and Russia in the dust. They even turned the tables and became net exporters of refined petroleum products in 2011.
Oil prices rebounded slightly on Friday but are still expected to show losses for the week due to concerns about slowing growth in the US and China. US crude futures rose 2.7% to $70.41 per barrel, while the Brent contract increased by 2.5% to $74.33 per barrel.
The past several weeks have been a real triumph for the bulls in the oil market. The Brent spot price grew by 8.5% during the last month.
Gold prices are rising for three consecutive days ahead of the Federal Reserve (Fed) interest rate decision, which is expected to remain unchanged due to declining inflation and a positive economic outlook. Investors are keen on the Fed's interest rate guidance, fearing a hawkish stance that could trigger market risk aversion.
Amid concerns of a Chinese economic slowdown, reports of declining investment often overlook China's efficient investment strategy in emerging sectors for long-term growth. China has taken measures to stabilize foreign and private sector investments, like reducing the reserve requirement ratio to boost investor confidence.
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