Jakarta, CNBC Indonesia – World gold prices shot up 1.6% to 1,929.43 / troy ounce, throughout last week. The United States dollar (US), which was sluggish due to expectations of fiscal stimulus in the US, prompted gold to shoot up.
Meanwhile, today, Monday (12/10/2020), at 17:51 WIB, the price of gold was corrected 0.46% to US $ 1,921.16 in the spot market, according to Refinitiv data.
The magnitude of the influence of the US dollar on the movement of gold was clearly visible last week. The US dollar index rose only once on Tuesday, the rest was weak. In contrast, gold fell only once on Tuesday, the rest strengthened.
The US dollar and gold do have a negative correlation, meaning they are moving in opposite directions, and that was very visible last week.
The US dollar is sluggish, the tug of war over fiscal stimulus could not help the performance of the greenback. The US dollar is in a “hit, backwards” situation in the face of fiscal stimulus.
US President Donald Trump on Tuesday asked the US $ 2.2 trillion stimulus talks to be stopped until the November 3 presidential election.
“I instructed representatives to stop negotiating until after the presidential election,” he wrote on his personal Twitter @realDonaldTrump, Tuesday (6/10/2020) afternoon local time.
The US dollar had strengthened in response to this. However, without fiscal stimulus the US economic recovery will be threatened, and will instead be left behind other countries in Europe and Asia. As a result, the US dollar was again under pressure.
The day after President Trump changed his stance on fiscal stimulus, now urging Congress to approve a stimulus program worth US $ 1,200 in Direct Cash Assistance (BLT) for US citizens, then US $ 25 billion for the aviation industry, and US $ 135 billion in loans for small businesses.
Trump’s change in attitude has improved sentiment among market players. When market players’ sentiment improves, the US dollar is an asset safe haven to be unattractive. In addition, if the fiscal stimulus is liquid, the amount of money in circulation will increase in the economy and the value of the US dollar will weaken.
Most recently, President Donald Trump’s administration has submitted a proposal for a new stimulus package worth US $ 1.8 trillion. On the side of the opposition Democrat Party, the stimulus value is too small. Democrats are still proposing a US $ 2.2 trillion stimulus package.
Meanwhile, in the stronghold of government supporters, namely the Republican Party, the US $ 1.8 trillion stimulus package is considered too big.
The tug of war on the stimulus will determine where the gold will go this week.
Gold, although also a safe haven asset, continued to strengthen due to the weakening US dollar. In addition, fiscal stimulus together with monetary stimulus were the main “fuel” for gold to strengthen this year to hit an all-time high of US $ 2,072.49 / troy ounce on August 7.
“If there is a deal, the stimulus will have the potential to revive inflation expectations towards the US central bank’s (The Fed) target, along with the Fed’s low interest rates being a very good catalyst for gold” said Bart Melek, chief commodities strategist at TD Securities. , launch Reuters.
Meanwhile, the results of Kitco’s survey of analysts on Wall Street show very bullish on gold this week.
Of the 17 analysts who participated, as many as 13 people or 76% gave outlook bullish (uptrend) this week, as much as 6% bearish (downtrend) and 18% neutral or move sideways.
Kitco also conducted a survey of market participants called Main Street from 1,164 who participated as much as 54% bullish, 26% bearish, and 20% neutral.
Technical Analysis
Technically, gold prices managed to bounce back from the decline after holding above the 100-day moving average (Moving Average/ MA 100) on the daily chart.
The stochastic indicator on the daily chart is moving upwards but has not entered the buy saturation territoryoverbought).
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Graik: Daily Gold (XAU / USD) Foto: Refinitiv- – |
Stochastic is leading indicator, or indicators that initiate price movements. When Stochastic reaches the territory overbought (above 80) or oversold (below 20), then the price of an instrument has the opportunity to reverse direction.
The stochastic hasn’t entered the territory yet overbought provide more room for gold to strengthen.
Rupiah has room to strengthen to MA 50 in the range of US $ 1,938 to 1,945 / troy ounce. If it is able to consistently penetrate above US $ 1,945 / troy ounce, gold has the potential to shoot higher to US $ 1,970 / troy ounce.
Meanwhile, the psychological level of US $ 1,900 / troy ounce is the closest support, as long as it stays above it, gold tends to shoot up. Gold’s strengthening potential will fade if it returns below this psychological level.
CNBC INDONESIA RESEARCH TEAM
(pap / pap)
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