Gold Analysis 08.08.2019

Gold futures fluctuated in a narrow, bullish range during the Asian session to stabilize near the highest in more than six years amid the decline of the US dollar index for the fourth session in six sessions from the highest since May 15, 2017 according to the inverse relationship Following the economic developments and data followed by the Chinese economy, the largest consumer of metals in the world and on the threshold of developments and economic data expected Thursday from the US economy, the largest economy in the world.

At 04:17 am GMT, gold futures for December 15 fell 0.01% to trade at $ 1497.75 an ounce compared to the opening at $ 1498.63 an ounce, noting that the contracts started the session on a falling price gap after the close of trading Yesterday at $ 1,500.97 an ounce, with the US dollar index down 0.06% to 97.53 compared to the opening at 97.59.

China's economy, the second largest in the world after the US, followed the release of the Trade Balance Index, which showed that the surplus shrank to 310 billion yuan ($ 45.1 billion) from 345 billion yuan ($ 51.0 billion) in June. Last, in line with expectations that indicated a surplus of 310 billion yuan equivalent to $ 43.2 billion.

In the same context, the annual reading of the export index showed that growth accelerated to 10.3% compared to 6.1% in the previous annual reading for the month of June, exceeding the expectations that accelerated growth to 7.0%, while the annual reading of exports in the US dollar rose 3.3% against a decline 1.3%, contrary to expectations for a decline to 1.0%.

The annual import index also showed a 0.4% rise versus a 0.4% decline in the previous June reading, beating expectations for a 3.3% decline, while the annual US imports figure showed a decline to 5.6% vs. 7.4%. Expectations of a decline to 9.0% came amid market pricing for the effects of the trade war between the world's two largest economies.

The People's Bank of China (RMB) set the yuan's exchange rate at the highest 7 yuan per US dollar barrier for the first time since 2008, which was interpreted as indicating that the Chinese authorities are seeking to curb recent yuan devaluations, in one way or another. Markets are concerned that trade tensions between Washington and Washington have worsened into a currency war.

On the other hand, investors are currently awaiting the release of the US jobless claims for the past week on August 3, which may reflect stability at 215K, unchanged from the previous weekly reading, before we see the final reading of the wholesale inventory index which It could show a stable growth of 0.2%, little changed from the initial reading for June and against 0.4% in May.

It is noteworthy that the US administration has been widely criticized China after the yuan exchange rate fell below 7 yuan per dollar for the first time in more than a decade, and described it as manipulating the exchange rate to take advantage of competitive advantages in export at the expense of others, in return the bank refused China's central bank has accused the US Treasury of manipulating the yuan's exchange rate against the dollar and accusing it of fighting a currency war within the trade war.

This follows the recent escalation of trade tensions between the United States and China following Chinese Commerce Ministry statements over the weekend that Chinese companies may stop buying US agricultural products in response to US President Donald Trump's decision last Thursday to impose 10 percent tariffs on Chinese imports to his country worth 300 $ Billion by early next month.

The Chinese Ministry of Commerce reported earlier this week that it would not "exclude" tariffs on agricultural goods purchased after August 3, and China is one of the largest importers of US agricultural products. Jang also said last Monday that his country would not use currency exchange rates as a tool in the escalating trade dispute with the United States.

Yesterday, US President Donald Trump said that the main problem lies not in China, but in the Federal Reserve, accusing the Federal Reserve of stubbornly admitting its erroneous tendencies and hastening to raise interest rates on federal funds, while appealing for a further cut. Faster interest rates in addition to stop all the tightening steps, and touched on the weakness of inflationary pressures and widening the gap of the yield curve.

In the same context, we also followed yesterday the Federal Open Market Committee member and Chicago Federal Reserve Chairman Charles Evans expressed that the high risks to the US economy may require a lower rate of interest than expected, pointing out that risk management may require more expansionary policies. He expects his country's economy to grow 2.25% this year.

Technical Analysis

Gold has been trading slightly negatively since yesterday, confined within a bearish intraday channel that we believe is forming an bullish flag pattern, which means that a breach of 1505.00 will provide a positive incentive to support the expectations for the continuation of the bullish intraday and short term direction, where our next target is at 1526.85.

From here, we continue to favor the bullishness over the coming sessions supported by SMA 50, noting that the breach of 1484.40 will pressure the price to start a bearish corrective wave before.