The gold prices remained stable above $1,739 with an intraday high $1,740.74 during the pre-Tokyo Asian session on June 1. The bullion benefits came from the recent escalation in risk-off mood as tension grows between the US and China. The precious metal is also taking some clues from the increasing riots across America.
Despite President Trump avoiding to announce more sanctions on China, there are fears of worsening relations between the two economic powerhouses according to the South China Morning Post (SCMP). The reason that was cited by the Chinese publication is the dominance of groups that call for more ‘fighting spirit’ over the entities and individuals who favor cooperation and dialogue.
On the flip side, the US Secretary of State Mike Pompeo somewhat condemned the ruling party of China in a recent Fox interview. An official statement from the Trump Administration read:
“This is a Chinese communist party that has come to view itself as intent upon the destruction of western ideas, western democracies, and western values.”
Pompeo also said that the Chinese Community Party’s military advances should not be ignored. In other news, riots are becoming more severe across the US with Chicago suspending all bus and rail services until June 1 morning local time.
All these catalysts are favoring the rush to risk-safety which resulted in the S&P 500 Futures losing 3,010 at some point. Looking elsewhere, China’s Caixin Manufacturing PMI for May came in at expected 49.6 versus 49.4 prior. That data may provide immediate direction to the markets. Nonetheless, the increasing geopolitical tensions may remain in the spotlight for now.
After breaching the 10-day EMA successfully, gold seems to be ready to aim for the May 20 high of $1,754. Currently hovering around $1,728.65/60, analysts believe that if the May 20 high does not hold; the precious metal will challenge the previous month’s top near $1,765.40.
On the other hand, if a downside break ensues below 10-day EMA; the price may plunge toward the 50-day EMA level of $1,691.60.