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  • Gold holds in bullish territories with plenty of geopolitical risk on the boil.
  • Brexit is back to the fore and has pushed investors to the sidelines.

Gold prices were elevated overnight but have fallen back a touch in early Asia in thin trading conditions as we await further evidence that the trade talks between the US and Sino are on track for this month and what immediate Brexit developments will unfold for the rest of this week. Gold is currently trading at $1,526.10, having travelled between a range of between $1,525.79 and $1,529.88.  

Brexit is back to the fore and has pushed investors to the sidelines in anticipation of political turmoil in the UK.

“PM Johnson is to deliver a key speech to parliament Tuesday relating to the proposed suspension of parliament and the Queen’s Speech on 14 October. The net impact is increased potential of for a general election, which Johnson says he will call for 14 October if he loses today’s Brexit vote,”

analysts at Westpac explained.  

China taking the brunt of trade wars

As for US and Sino trade talks, the toll that the dispute is taking on China is evident and the combination of heightened risks from Hong Kong are troublesome for risk appetite in the wider financial and commodity markets. There also appears to be a delay in arranging a time and place to meet again between the US and Chinese negotiators.  

China’s manufacturing purchasing managers’ index dropped to 49.5, according to data released Saturday by the National Bureau of Statistics, with sub-gauges showing that domestic and new overseas orders contracted. The Caxian was a better result, with the data more focussed on small to medium-sized enterprises – So, the government isn’t sounding the alarm just yet and the State Council, China’s cabinet, released a statement saying that overall risks are “controllable with state media signalling the government is ready to weather the economic turbulence as no progress to resolve the standoff is in sight.

Meanwhile, the Dollar remains firm and while the cash US treasury bond market was closed for the holiday, futures did trade and were implying the 10-year yield ranged between 1.48% and 1.53%. The market is factoring in a 25basis point cut this month at the 19 September Fed meeting.

Gold levels

The 1,520-1,525 price zone is holding still so there are still prospects for a run to the 1,558 level to open 1,590 as the 127.2% Fibo target area.   On the other hand, a 50% mean reversion falls in at 1,478 which was also a level of support on the 13 Aug volatility and drop.