During the Asian trading session on Wednesday gold traded in the red zone due to recovery of the US dollar (dollar index + 0.1%) and strong data from China.
China's economy continues to rebound, boosted by increased exports, government stimulus and deferred domestic demand, following the worst floods in decades. As a result, in August, the PMI of the manufacturing sector rose from 51.0 to 51.5 points. The figure dropped from 53.1 to 53.0, according to Caixin, but remains well above the 50 mark, indicating an expansion in production.
After a strong decline on Tuesday, the US dollar is recovering on Wednesday. The US currency is supported by strong data on the consumer confidence index and hopes for a new stimulus package. Many experts doubt that the Republicans and Democrats will be able to pass the bill before the presidential elections, but Pelosi and Mnuchin continue to actively negotiate, which could culminate in a compromise.
Despite the local decline, the overall fundamental background for gold remains positive. Major stock indexes are trading in the red zone today. Uncertainty is also growing in the market in connection with the upcoming US presidential elections and the active spread of a new wave of the coronavirus pandemic.
Today we are expecting a very busy news calendar. In the US a report on the labor market from the ADP, the final data of the estimate of GDP for the 2nd quarter and data on unfinished sales in the real estate market are expected.
After fixing above the level of 1875.00, a moderate upward movement continues to develop on the chart. The closest target is still the level of 1903.00. After the breakdown of this mark, we can expect the growth of quotations to 1921.00.
The main scenario - growth to 1903.00.
An alternative scenario - a decline below 1875.00 and a fall to 1853.00.
The current fundamental outlook is neutral. We consider longs from the level of 1875.00.
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