Gold fails to hold on to recovery amid broad greenback strength, trade uncertainty

• Gold prices remain below 100-day EMA.
• Optimism surrounding the US economy, upbeat Fedspeak confronts doubts on US-China trade deal.
• Powell’s testimony, US CPI will be the key to watch.

Although pessimism surrounding the US trade relations with China and the EU, coupled with Hong Kong protests, favored Gold to bounce off multi-month lows on Tuesday, prices are again under pressure while taking rounds to $1,458 during Wednesday’s Asian session.

The US dollar (USD) regained its strength the previous day amid upbeat comments from the Federal Reserve (Fed) officials and market’s rush to risk-safety. Extending the greenback’s strength are the latest statements from the United States (US) President Donald Trump and White House (WH) Adviser Larry Kudlow. Both of them showed optimism concerning the domestic economy, challenged the Fed’s monetary policy and increased doubts on future trade relations between the US and China.

While the US President Trump stood ready to inflate tariffs on Chinese products should the deal fails, Mr. Kudlow said tariff reduction could be the part of the phase one deal but not until the entire deal is put together. On the other hand, the Federal Reserve Bank (Fed) of Minneapolis President Neel Kashkari recently said that he is feeling a bit better about the US economy than he had a few months ago.

Elsewhere, Hong Kong protests continue while the US and China arguing each other. The US blames the dragon nation limiting Hong Kong’s autonomy while China almost warns the Trump administration to stay away from the internal issues.

Even so, global bonds stay mostly unchanged, despite being downbeat, while stocks are waiting for the US Federal Reserve Chairman Jerome Powell to testify in front of the Joint Economic Committee. Also contributing to the wait and watch mode in October month Consumer Price Index (CPI) from the US.

Concerning the data/events, TD Securities said, “We look for  headline inflation to remain unchanged  at 1.7% y/y in October, partly aided by an increase in energy prices, while core inflation should decline a tenth to 2.3% y/y. In particular, we expect core goods inflation to recover m/m, but for core services inflation to slow to 0.2% m/m after four straight increases at 0.3%. Conversely, we expect Chair Powell to largely reiterate the FOMC policy message that monetary policy and the economy remain “in a good place” at the start of his two-day visit to the Hill on Wednesday.”

Technical Analysis

Unless breaking 100-day Exponential Moving Average (EMA) level of $1,464, prices are less likely to revisit $1,500 area, which in turn highlights the importance of a three-month-old falling trend line support, at $1,431 now.