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Gold loses positions as investors reach for risky assets

May 19 2020, 02:00 PM (+06) | Fortfs.com

On Tuesday, gold prices are trying to restore lost positions due to the ongoing tension in Sino-American relations and weakening USD. But, due to increased hopes for an early implementation of the COVID-19 vaccine and a faster recovery of the global economy, the demand for protective assets remains limited.

 

The main driver of the decline for gold on Monday was the news that the American company Moderna has conducted successful initial trials of a new vaccine for coronavirus. According to the results, antibodies to COVID-19 were detected in all patients participating in the tests in the same volume as in people who had the virus. This news has radically changed the situation on the market. Investors are betting on a faster economic recovery after defeating the coronavirus. Against this background, interest in gold and other protective assets is noticeably declining.

 

A supporting factor for gold remains the tense situation between the US and China. A new round of trade conflict could significantly slow down the process of global economic recovery. According to the latest data, the Trump administration calls on all large companies to withdraw their capital and key suppliers from China, promising tax breaks and new subsidy conditions as preferences. It also became known that the NASDAQ Stock Exchange intends to introduce new restrictions on Chinese IPOs. But so far this news can not keep the gold from further decline.

 

Today, FRS Chairman Powell and Treasury Secretary Mnuchin will speak in front of the US Senate Banking Committee. Earlier Trump's law on the allocation of 2 trillion dollars to support the economy involves regular reports by the head of the FRS and the Minister of Finance to lawmakers. The FRS has already published a speech. The market does not expect surprises from Jerome Powell's performance. The text of the report by Stephen Mnuchin stated that he expects improvement in the economy in the second half of the year.

 

A fairly strong reversal signal is formed on the chart. The price bounced down from the level of 1765.00 and was quite able to gain a foothold below the mark of 1740.00. Now the bears are trying to push support at 1729.00. If they are successful, we can expect a decline to around 1695.00.

 

Resistance Levels: 1740.00, 1765.00, 1780.00;

 

Support Levels: 1729.00, 1722.00, 1695.00.

 

The main scenario - a consolidation below the level of 129.00 and a decline towards 1695.00.

 

An alternative scenario - a consolidation above the level of 1740.00 and growth towards 1765.00.

 

The current fundamental outlook is moderately negative. We consider shorts in the range of 1740.00-1745.00. 

 

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