Gold and silver were near unchanged overnight as they consolidated their losses of the past several sessions. With money flowing towards the dollar, gold has been losing out on safe-haven interest despite a negative turn in trade relations between the US and China over the past couple of weeks.
The gold market is in a precarious position technically after trading down to the 200-day moving average for the third time in a month on Tuesday. The US postponing its restrictions on Huawei was bearish for gold yesterday, but new talk that the US may blacklist five Chinese technology firms could lend some support today.
The June dollar index traded to its highest level since putting in a contract high on April 26th yesterday, and this left gold languishing. The dollar eased a bit overnight, as it too seemed to be consolidating, but if makes a move to take out the April high, it could spark another wave of selling in gold.
Strong economic data sparked heavy selling in gold last week, as it suggested that the Fed would not need to lower rates, despite the trade war concerns. The trade war and Iran seem to have faded into the background as far as gold is concerned, but that could change.
It would probably require a series of disappointing economic data to spark some buying in gold, as that could rekindle ideas of the Fed lowering rates. In the meantime, June gold is threatening to take out the 200-day moving average, and if that happens, it could spark some heavy selling.
The trade will have the opportunity to see the recent Fed meeting notes today, which in the absence of other news could spark a move if it comes in overly hawkish.
The Chinese Ambassador to the US stated that Beijing was ready to resume talks with Washington but blamed Washington for changing its mind on tentative deals.
Gold ETF holdings rose yesterday on what could have been bargain hunting. It is also worth considering that central bank buying could reemerge on the recent break in gold.
Secretary of State Pompeo is going to Capitol Hill today to talk about Iran, which could elevate risk concerns.
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