- Strengthening U.S Dollar
- Souring U.S China Relations
- Demand For Safe Havens
Gold prices appear to be heading for a rare weekly loss even as deteriorating U.S-China relations continue to weigh in on risk appetite. The precious metal, known to elicit strong demand in times of crisis, has remained subdued in a tight trading range, struggling to edge higher amidst a strengthening U.S Dollar.
Strengthening U.S Dollar
The U.S Dollar has continued to strengthen against a basket of other major currencies at the backdrop of weak economic data in the U.S. Americans are increasingly filling for unemployment benefits as the effects of the COVID-19 pandemic continue to cause havoc. More than 30 million Americans have lost their jobs, raising concerns about the health of the world’s largest economy.
Amidst the fallout in the U.S economy, the U.S dollar has continued to strengthen supported by safe-haven demand. Dollar strength appears to be taking a toll on Gold, which is struggling to break out. Gold markets continue to show lots of tight trading near the $1750 handle, which has emerged as a strong resistance level.
Amidst the underperformance, in recent sessions, Gold remains bullish and likely to edge higher after his recent consolidation. Souring U.S China relations is one of the developments that could offer support to gold prices going forward. U.S president has already warned that the U.S would respond strongly to any move by China to impose new national security legislation on Hong Kong.
U.S Senators Introducing a bill that calls for tough sanctions on Chinese officials and entities that enforce any new national security laws on Hong Kong looks set to fuel a diplomatic showdown between the U.S and China.
Tensions between the U.S and China even before the Coronavirus rhetoric eases should continue to fuel demand for safe-haven assets such as Gold. Unlike other metals, Gold tends to perform well in times of crisis as an asset of storing value.