Commodity Market: Gold pares earlier losses, remains supported above the $1,720 mark as US-China tensions intensify

Spot Gold slid to an intraday low in Asia trade on light volume, but managed to recoup part of those losses in early European session, as intensifying tensions between the United States and China kept safe haven asset demand supported.

Beijing’s move to impose a national security law on Hong Kong raised concerns over the city’s financial hub status and global trade prospects. White House National Security Adviser Robert O’Brien said China’s move could lead to US sanctions, as it was perceived as a major blow to liberties in Hong Kong.

In response, the US Commerce Department on Friday added 33 China-based companies and other institutions to a blacklist for human rights violations.

US President Donald Trump has already warned of a strong US response, in case the new security law was enacted.

An additional catalyst to tensions between the world’s two largest economies was the approval by the Trump administration last week of a potential $180 million arms sale to Taiwan. Meanwhile, China’s Foreign Minister Wang Yi said overnight that Washington was slowly moving towards a “new Cold War” with Beijing.

“Gold is a buy around $1,675, and a sell around $1,750 and it’s been that simple. Gold ETFs continue to expand for the 20th straight week with unrest in Hong Kong after China’s recent crackdown, and explosive federal government spending all reasons to be long gold,” Joshua Graves, strategist at RJO Futures in Chicago, wrote in an investor note.

“The technicals though, again, seem to have the edge here. Traders right now need to position themselves for a neutral to moderately bullish outlook, and custom strategies based on market bias and risk tolerance,” he also noted.

At 9:38 GMT today Spot Gold was retreating 0.30% to trade at $1,729.22 per troy ounce, after touching an intraday low of $1,724.10, or a price level not seen since May 21st ($1,717.57). Meanwhile, Gold futures for delivery in June were losing 0.37% on the day to trade at $1,729.00 per troy ounce, while Silver futures for delivery in July were down 1.20% to trade at $17.480 per troy ounce.

The US Dollar Index, which reflects the relative strength of the greenback against a basket of six other major currencies, was gaining 0.12% on Monday to 99.92, after climbing as high as 99.98, or a level not seen since May 18th (100.47).

Meanwhile, near-term interest rate expectations were unchanged. According to CME’s FedWatch Tool, as of May 25th, investors saw a 99.3% chance of the Federal Reserve keeping borrowing costs at the current 0%-0.25% level at its policy meeting in June, unchanged from May 22nd.

No relevant macroeconomic reports or other events are scheduled for today, while trade is likely to remain subdued due to public holidays in the United Kingdom and the United States.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – $1,733.06
R1 – $1,741.61
R2 – $1,748.78
R3 – $1,757.33
R4 – $1,765.89

S1 – $1,725.90
S2 – $1,717.34
S3 – $1,710.18
S4 – $1,703.01

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