4th December 2019 - The fear of Sino-American trade dispute escalation revived the demand for gold

Walid Salah Eldin

Active member
The investors' worries about the trade negotiations future between US and China increased significantly containing the market sentiment, following the U.S. House members voting to impose sanction against Chinese officials for their human rights abuse, after the US Senate unanimously passed a bill aimed at protecting human rights in Hong Kong.

Trump's administration has previously put visa bans on Chinese officials linked to the mass detention of Muslims in Xinjiang province, Trump has actually warned that he is to impose more tariffs on China if talks failed.

The demand for safe haven increased sending UST prices higher, as Beijing is expected to take action soon and retaliate against this resolution, especially, if there could escalating by raising U.S. tariff on Chinese goods on Dec. 15 as scheduled previously, before the trade talks advance to form a phase-one trade deal containing all what the 2 side reached.

The US equities indexes managed to correct to the downside, after continued creeping up sent them to all times highs by the end of last week, following US and Chinese officials reference last Thursday to that the phase-one would feature pledges to roll back tariffs on each others’ goods in the future phases.

While The greenback was still negatively impacted by the dovish release of Nov US ISM Manufacturing index which sparked speculations of having more interest rate cuts to come in US sooner than later to prop up this sector.

GBPUSD which is waiting for an outright Tories' victory supported by Nigel Farage's Brexit Party is now trading close to 1.30 and EURUSD could rise for trading above its daily SMA100 close to 1.1075, after consolidation near 1.0000 psychological level, while USDJPY is struggling now to hold above 108.50 as the demand for the Japanese yen increased as lowest cost financing currency amid this risk aversion sentiment.

The dovish market sentiment sent S&P 500 future rate to 3069.86, before easing of the downside momentum ended to rebounding to 3093.17 currently, while The gold could have easily a leg up reaching $1481.71, while Bonds yields were diving.

While the oil prices are still astray vacillating between the manufacturing activity weakness in US and the optimism about the manufacturing improving in China, after Caixin China manufacturing PMI was able to rise for the fifth consecutive month reaching 51.8 in November.

And in the same time, we find Russia’s Central Dispatching Department of Fuel Energy Complex showing crude oil exports decreasing by 4.2% in November 2019 Year on Year to 20.916m tones, we see also EIA says that U.S. crude oil production averaged 12.9mbd last week, up by about 1.2mbd Year on Year . EIA expected also that U.S. total crude oil and petroleum products net exports are to average .75mbd in 2020 comparing with.52mbd net imports average in 2019.

While most expectations are referring now to a decision to hold the current output cuts at least until June 2020 with no deeper cut, when OPEC and OPEC+ members are set to meet next Friday in Vienna.

God willing, the markets will be also tuned next for the release of US Nov non-Manufacturing ISM index later today to know whether or not the manufacturing sector weakness could spill over the service sector.

The worries about that eased down considerably following the release of Oct non-manufacturing ISM which has shown rising to 54.7, while the consensus was referring to 53.5, after slide in September to 52.6 reaching the lowest level since August 2016.

But The Employment Index of NOV ISM Manufacturing could actually spark worries about the labor market due to its retreating to 46.6 from 48.2 in October, as The manufacturing sector accounts for nearly 12% of the US economy and 8% of the labor market which will release its report of November by the end of this week.

Now, we wait for Nov non-Manufacturing ISM to show retreating to 54.5, after US ISM Manufacturing index shocked the markets in the beginning of this week by setting back to 48.1, while the consensus was referring to further improving to 48.3, after deterioration to 47.8 in September to record its lowest level since July 2009, following 6 consecutive monthly slippages since rising to 55.3 last March.

XAUUSD Daily Chart:

XAUUSD-Daily-04-12-2019 08-43-47 ص.jpg

After holding around $1460 per ounce for more than 2 weeks, XAUUSD could extend its rebounding from $1445.65 to $1481.71 yesterday.

XAUUSD is having now closer existence to its daily SMA50 and its daily SMA100 which are moving just above it.

XAUUSD is trading now in its day number 11 of continued being above its daily Parabolic SAR (step 0.02, maximum 0.2) which is reading today $1452, after it could form a higher low at $1450.19 to hold above $1445.65 low of last Nov. 12.

The daily chart of XAUUSD shows that its RSI-14 is now at a higher place inside its neutral area reading 54.854.
XAUUSD daily Stochastic Oscillator (5, 3, 3) which is more sensitive to the volatility is having now its main line inside its overbought territory reading 86.904, leading to the upside its signal line which is lower inside the neutral area reading 74.569, after positive crossover just inside this same area.

Important levels: Daily SMA50 @ $1482, Daily SMA100 @ $1486 and Daily SMA200 @ $1402
The Closest Experienced S&R:
S1: $1445.65
S2: $1381.82
S3: $1319.90
R1: $1519.54
R2: $1535.72
R3: $1557.02

Kind Regards

Global Market Strategist of FX-Recommends

Walid Salah El Din
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