Gold analysis 25.05.2020

Gold prices fluctuated in a narrow range slanting back down during the Asian session to witness its bounce for the third session in six sessions from its highest since April 14, when it tested its highest since the fifth of October 2012 amid the US dollar index rebound to the fourth session from the lowest It has been around since May 4, when it tested its lowest since March 30, according to the inverse relationship between them.

This comes amid the scarcity of economic data on Monday by the US economy due to the Memorial Day holiday in the United States and in the wake of the report that touched on the Japanese government's intention to adopt more stimulus to face the negative economic repercussions of the Corona outbreak and in conjunction with growing concern about the return of strikes in Hong Kong and the escalation of tensions between Washington and Beijing over the weekend and amid the persistence of the Chinese National People's Congress.

At exactly 04:43 AM GMT, gold futures contracts for next August delivery fell 0.44% to trade at $ 1,745.30 per ounce compared to the opening at $ 1,753.00 per ounce, knowing that the contracts started the session’s trading on a falling price gap after it concluded trading Last week, at $ 1,753.50 an ounce, with the US dollar index rising 0.04% to 99.84 compared to the opening at 99.80.

We have also followed up on the report that the Japanese government is considering adopting a new stimulus package worth 100 trillion yen ($ 929 billion) that will mostly consist of the financial aid program for companies that were affected by the Corona pandemic, and it is expected that the package will be funded with a second additional budget for the fiscal year that started with Early April, as part of record spending plans of $ 1.1 trillion to mitigate the negative economic consequences of the coronavirus outbreak.

It is expected that the additional budget of the Japanese government will include 60 trillion yen to expand the loan program provided by state and private financial institutions to Japanese companies affected by the repercussions of the outbreak of the Corona Virus, and it is expected that the Japanese government will agree during the cabinet meeting tomorrow, Wednesday, on this additional budget It will also include support to help companies pay rent and wages when the business closes.

This comes hours after the Bank of Japan's monetary policymakers decided last Friday at the May 22 emergency meeting, which was held for one day as a precaution against the spread of Corona, to keep interest rates negative at 0.10%, which came in line with expectations at the time, with Also, remain committed to directing the 10-year government bond yield to zero.

In the same context, the Central Bank of Japan revealed on Friday the monetary policy statement, which reflected the Bank of Japan's offer of further stimulus with the launch of a new lending program aimed at channeling more money to small and medium-sized companies that suffer from the economic blow to the outbreak of the coronavirus, while stating that The deadline has been extended for a series of recent actions he has taken to combat the consequences of the Coronavirus.

The Bank of Japan announced at that time that it would accelerate the purchases of corporate debts with a six-month period until the end of the current fiscal year on March 31, 2021, with his statement that the response measures to the virus totaled to 75 trillion yen, and this comes in the wake of the Bank of Japan raising in Last April's meeting, the maximum purchase limit for corporate and commercial securities that it pledges to purchase is 20 trillion yen from 7 trillion yen previously.

It is reported that the Japanese Central Bank also confirmed last month its commitment to purchase unlimited amounts of government bonds by canceling the previous directive to purchase them at an annual rate of about 80 trillion yen, as the monetary policy statement included at that time a paragraph, "The Bank of Japan will purchase the necessary amounts of government bonds without Set a maximum limit so that the yield of 10-year bonds remains at about zero percent.

In contrast, the Chinese foreign minister also told reporters yesterday that some political forces in the United States are taking bilateral relations "hostage" and pushing the two economic powers to the brink of a "new cold war", according to an official English translation from his statements published by the Foreign Ministry, otherwise, we would like to point out, As the Chinese National People's Congress confirmed that the Chinese government was ready to implement its promise of the trade agreement signed with Washington.

We would like to point out that despite China’s assertion of its commitment to the first stage of the trade agreement with the United States, tensions between Washington and Beijing have increased significantly after the Chinese parliament passed the new Chinese security law and the two parties criticized each other about it, and in the wake of the Senate’s pass. The US also earlier this week a bill preventing Chinese companies from listing on America's stock exchanges.

On the other hand, investors awaited later this week by the US economy, to disclose the second reading of the GDP index, which may confirm the contraction of the largest economy in the world, 4.8%, as the previous preliminary reading showed and against the growth of 2.1% in the fourth quarter, while The second reading of the same index, measured in prices, may confirm a growth of 1.3% as well, with little change from what it was in the previous reading for the fourth quarter.

Technical analysis

The price of gold is now testing the pivotal support 1725.90, which represents one of the keys to the next direction next to the resistance 1745.50, as it falls under the negative pressure formed by the stochastic indicator, which provides an advantage to present more negative trades during the upcoming sessions.

Until now, we continue to monitor the price with respect to the mentioned levels until we get a clearer signal for the next direction, noting that breaking the mentioned support will push the price to visit the first correction level at 1691.10 directly while breaching the resistance will motivate the price to restore the main bullish trend and head towards 1810.00 as a target Next positive.

The expected trading range for today is between 1705.00 support and 1750.00 resistance.

Expected trend for today: It depends on the levels mentioned in the report.