XAU/USD Outlook: Gold Strengthens Amid Rising Political Tension Between US and China

  • As political strains between the US and China rises, gold strengthens as a safe-haven and seems to be pressing higher.

    Interestingly, the yellow metal is up with the stocks in spite of higher yields, with the weaker USD as one of the possible key drivers.

     

    Rising Political Strains

    Last week, the US proceeded discussions on preventing Chinese corporations from posting on US financial exchanges, removing a significant inflow of capital. Likewise, its President, Donald Trump, kept the warning that the country would impose further tarrifs on China in light of regarded Chinese inactions over the COVID-19 infection flare-up.

    On the other hand, the Hong Kong stock exchange fell dramatically after China planned another security law that would supersede portions of the law in Hong Kong. There are ongoing concerns that China will overturn current Hong Kong officials and enforce their new security laws. The Hang Seng completed with 5.6% lower, marking its biggest fall since 2015.

     

    What Happens Next?

    Gold is currently on an uptrend and continues to edge higher. There are two levels of retracement that we can look at before the price goes higher. The price level may fall back to 1720.73 level or more likely, to the 1686.458 level before it inches higher in the short-term. Meanwhile, it is expected to peak at 1775.908 in the long-term.

    The combination of the uptrend plus the fundamental factors that push the price higher gives the gold much room to exhibit strength in the next coming days or weeks.

     

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