Commodity Market: Gold rebounds from two-week lows on worsening US-China relations, new massive stimulus packages

Gold prices rebounded from two-week lows overnight and the yellow metal extended gains during European trade on Thursday, as brewing tensions between Beijing and Washington supported demand for haven assets.

Gold also drew support by the recently unveiled stimulus packages worth $1.1 trillion in Japan and EUR 750 billion in the European Union respectively, aimed to mitigate the impact on economic activity from the coronavirus pandemic.

US Secretary of State Mike Pompeo said yesterday that Hong Kong no longer qualified for its special status under US law, one day after US President Trump said that a strong US response to Beijing’s planned security law on the former British colony was being prepared and due to be announced.

“The U.S. and China have disagreements on many fronts. There is trade, and there is inquiry into the coronavirus, and now this dispute over Hong Kong,” Michael McCarthy, chief strategist at CMC Markets, said. “That’s bad news for the globe as it spills over into trade — the impact on global growth, while the global economies are fragile, could be severe.”

At 9:30 GMT today Spot Gold was gaining 0.68% to trade at $1,721.11 per troy ounce, after touching an intraday high of $1,722.56, or a price level not seen since May 26th ($1,735.58). Meanwhile, Gold futures for delivery in June were gaining 0.56% on the day to trade at $1,720.35 per troy ounce, while Silver futures for delivery in July were up 0.93% to trade at $17.922 per troy ounce.

The US Dollar Index, which reflects the relative strength of the greenback against a basket of six other major currencies, was gaining 0.12% on Thursday to 99.07, rebounding from the three-week low of 98.72 registered yesterday.

On today’s economic calendar, market players will be paying attention to the second US GDP estimate for Q1, scheduled to be reported at 12:30 GMT, as well as on the weekly report on jobless claims at 12:30 GMT and the monthly report on pending home sales at 14:00 GMT.

Meanwhile, near-term interest rate expectations were little changed. According to CME’s FedWatch Tool, as of May 28th, investors saw a 99.3% chance of the Federal Reserve keeping borrowing costs at the current 0%-0.25% level at its policy meeting on June 9th-10th, compared with a 98.6% probability a day ago.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – $1,706.51
R1 – $1,719.02
R2 – $1,728.63
R3 – $1,741.13
R4 – $1,753.64

S1 – $1,696.91
S2 – $1,684.40
S3 – $1,674.80
S4 – $1,665.19