Gold Firms on U.S China tension and regains solid footing above $1800

Gold futures and spot gold broke below $1800 in trading overseas last night, however once trading began in New York prices traded off of the lows breaking back above $1800 by the close of trading. With the exception of spot gold all of the precious metals closed lower, with gold futures sustaining the smallest percentage drawdown on the day.

As of 4:30 PM EDT the most active August futures contract is currently down by
-0.09%, and fixed at $1812.30 after factoring in today’s decline of a $1.80. Physical or spot gold gained $6.39 in trading today and is currently fixed at $1808.50 which is a net gain of +0.37%. Both platinum and palladium sustained approximately 2 .5% drawdown today. Silver lost approximately -0.77% and is currently fixed at $19.63 after factoring today’s decline of $0.15.

Continued concerns about the rising cases of Covid-19 in hotspots worldwide remain. The United States has added 58,858 new cases, taking the total number of reported cases to 3,355,457, this according to the CDC. According to John Hopkins confirmed total cases worldwide is now at 13,177,855, with the loss of 574,793 souls from the virus.

The safe haven asset gold benefited from economic data which indicated an uptick in inflation that came in above analyst forecasts. U.S. consumer price inflation is up 0.6% month on month for June. This is the largest month over month rise in inflation since 2012.

Gold pricing has also benefited from a growing U.S. budget deficit. According to the Washington Post, “The U.S. budget deficit widened to a record-high $864 billion last month because of the federal government’s extraordinary response to the coronavirus pandemic, the Treasury Department said on Monday …The huge surge in June pushed the budget deficit for the first nine months of the fiscal year to $2.7 trillion.”

Concurrently back on the front burner’s concern regarding the trade relationship between the United States and China. Pres. Trump recently rejected claims made by China as it pertains to the South China Sea. China announced sanctions on Lockheed Martin Corporation after United States approved that they would provide missile parts to Taiwan.

Trade negotiations between the United States and China have been put on hold due to the pandemic. However Reuters reported that, “White House Economic Adviser Larry Kudlow said on Monday that President Donald Trump is not in a good mood about China because of the coronavirus pandemic, new Hong Kong security laws and the treatment of the Uighurs, but the country is still part of the first phase of its massive trade deal with China.”

The fundamentals which have been at the core of higher gold pricing remains fully intact. Massive expenditures by the Federal Reserve and the U.S. Treasury, coupled with the massive stimulus packages from the ECB, Bank of Japan, and the Peoples Bank of China continue to grow. These expenditures will linger long after the pandemic subsides, the unprecedented economic fallout that will follow will greatly challenge global economic growth.

Wishing you as always good trading and good health,