The prices of gold declined by almost 2% on Monday after reaching a record high of $2,072.50 an ounce last Friday. The yellow metal was pushed down by the dollar which recovered and maintained its gain after the announcement of a 1.763 million increase in U.S. non-farm payrolls in July. Also weighing on the bullion was investors’ focus on tensions between the U.S. and China. The two largest economies in the world will review the Phase 1 of their trade agreement via videoconference on August 15. Another factor is the closure of the markets in Japan and Singapore to observe public holidays.
Spot gold is currently trading at $2,034.50 per ounce as of 0910 GMT.
AxiCorp’s chief market strategist Stephen Innes commented that the stronger dollar and investors’ tendency to book profits after such a big rally dampened the demand for gold. But he believes a market correction is possible, and it will depend on how traders view the strength of the greenback and the escalating tensions between the U.S. and China.
The latest issue in Sino-U.S. relations in President Donald Trump’s efforts to ban Chinese-owned mobile apps in the U.S. He issued an executive order that bans transactions with ByteDance, the China-based owner of the video-sharing app TikTok. Trump also plans to ban business dealings with Tencent Holdings Ltd., owner of messaging app WeChat.
On the COVID-19 issue, the number confirmed cases in the U.S. has already reached five million. To minimize its impact, Trump signed executive orders to extend unemployment benefits to those impacted by the pandemic. The coronavirus crisis has lifted the price of gold by more than 33% so far in 2020.
In physical trading, gold is still out of favor in most Asian markets because of pandemic-induced historic high prices that kept retail buyers away.
In a related development, the U.S. Commodity Futures Trading Commission reported that market speculators lowered their bullish stance in COMEX gold contracts for the week that ended on August 4. Also, the holdings of the largest gold-backed exchange-traded fund in the world SPDR Gold Trust dropped by 0.46% last Friday to 1,262.12 tons.