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Gold is growing due to worsening US-China relations

May 4 2020, 01:31 PM (BDT) | Fortfs.com

Gold and other defensive assets are in the green zone amid a worsening relationship between the US and China.

 

On Sunday US Secretary of State, Mike Pompeo mentioned an impressive amount of evidence in support of the COVID-19 virus originating from a Chinese laboratory. However, he did not specify the details, noting that he did not have the right to divulge this information.

 

On the same day, on Fox News, Donald Trump brought charges against China. He stated that China was trying to hide the scale of the initial epidemic within the country and is now trying to hide evidence that the virus was created at the Wuhan Institute of Virology. Trump threatened to exit the trade deal with China and strengthen sanctions.

 

Due to the aforementioned events, stock indices opened a trading week in the red zone due to anticipation of an aggravation of relations between the United States and China and a general decline in the global economy. Demand for gold and other defensive assets is growing, helping to increase their value.

 

There are no important macroeconomic reports in the economic calendar on Monday, so geopolitical news and the situation on stock exchanges will have a major impact on the dynamics of gold.

 

Regarding the chart, trading takes place above the level of 1695.00, therefore, as a priority today, we consider the scenario with the growth of quotations towards the level of 1722.00. The bearish scenario will become relevant after a price declines to the level of 1695.00.

 

Resistance Levels: 1722.00, 1740.00, 1755.00;

 

Support Levels: 1695.00, 1670.00, 1645.00.

 

The main scenario - growth towards 1722.00.

 

An alternative scenario - a consolidation below the level of 1695.00 and a decline towards 1670.00.

 

The current fundamental outlook is positive. Within the daily framework, we consider longs with entry points in the region of 1695.00.

 

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