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Gold rewrites multi-year maximums

May 18 2020, 01:23 PM (BDT) |

Gold starts the trading week with an increase of almost 1% against due to worsening relations between the US and China.


Over the weekend, US presidential adviser Peter Navarro, in an interview with ABC News, accused China of hiding information about the disease and the spread of COVID-19 by Chinese tourists around the world. Navarro noted that a null patient was identified in China in November, but the Chinese authorities, thanks to the connivance of the WHO, hid this information from the international community for two months. After that, the country's authorities did not prevent the spread of the virus by Chinese tourists. China could stop the spread of the virus in Wuhan, but instead the situation went to a pandemic. Navarro also accused China of benefiting from providing low-quality tests to other countries that give false results on COVID-19.


A bill introducing new sanctions against China was introduced in the US Senate last week.


After Navarro’s speech, US President Donald Trump announced that he was not happy with the interim agreement with China, signed in January this year. Trump's comments are somewhat contrary to the statements of economic adviser Larry Kudlow, who previously said that the United States and China are working on the implementation of this transaction.


Also in the media there was information that the Trump administration has blocked the supply of chips for Huawei Technologies. Investors fear a response from China and rising tensions between the world's largest economies.


Additional support for gold was provided by the news that the third largest economy in the world (Japanese) has gone over to a recession. After a decrease of 7.3% in the 4th quarter of 2019, in the 1st quarter of 2020 Japan’s GDP decreased by an additional 3.4%.


Today, there are no important events in the economic calendar, therefore, the situation on the stock exchanges and news on the development of the conflict between the US and China will have a dominant effect on gold.


A bullish trend continues to develop on the chart. Now the level of 1765.00 is being tested. Since there are no reversal signals on the chart, in the medium term we can expect further development of the upward movement in the direction of the level of 1800.00.


Resistance Levels: 1765.00, 1780.00, 1800.00;


Support Levels: 1740.00, 1722.00, 1695.00.


The main scenario - a breakdown of resistance at the level of 1765.00.


An alternative scenario - the correction towards 1740.00 and further upward movement.


The current fundamental outlook is positive. We consider longs in the range of 1740.00-1745.00.

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