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Gold is recovering from strong decline on Tuesday

Gold is growing on Wednesday morning, trying to recoup losses from the American session on Tuesday.

 

At the end of the American session on Tuesday, the value of gold fell sharply after US President Donald Trump announced the suspension of inter-party negotiations on the formation of a new stimulus package until the end of the presidential election. "I have ordered my representatives to stop negotiations before the election is over, and immediately after I win, we will pass the basic stimulus law," Trump tweeted. Let us remind you that the elections will be held on November 3.

 

The decision came as a surprise to both bipartisans and bidders. Investors began to panic fix long positions in many trading instruments including traditional defensive assets. USD rose sharply, increasing pressure on gold and other raw materials.

 

The president's decision significantly increases the uncertainty about the economic outlook for the US economy as many businesses and households continue to grapple with the impact of the pandemic.

 

Hours before Trump's tweet, Fed Chairman Jerome Powell warned of dire consequences for the economy if inter-party talks failed. Powell stated that the US economy could slide in a downward spiral if COVID-19 is not effectively controlled and called for additional economic assistance from the state.

 

In our opinion, gold can quickly recover yesterday's losses. The decline in gold quotes was caused by a short-term panic in the market and a sharp strengthening of the American currency. Amid growing uncertainty over the long haul, investors will continue to favor gold and other defensive assets.

 

In the economic calendar, the main event of the day will be the publication of the minutes of the last FOMC meeting.

 

A pullback movement is currently forming on the chart after testing the 1875.00 mark. Short-term can be considered short positions from the levels of 1893.00 and 1905.00, with the aim of retesting support at 1875.00. In the medium term, longs remain a priority. We are looking for entry points in the area of โ€‹โ€‹the level of 1875.00.

 

  • Resistance levels: 1893.00, 1905.00, 1920.00.

 

  • Support levels: 1875.00, 1867.00, 1853.00.

 

The main scenario - a decline from the level of 1893.00 to 1875.00 and a resumption of upward movement.

 

An alternative scenario - a breakdown of resistance at 1893.00, growth to 1905.00 and a downward reversal.

 

The current fundamental outlook is neutral. We consider shorts from the levels of 1893.00 and 1905.00.

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