Gold prices are trading easier shortly after the regular session opening on Tuesday as hopes of economic recovery lifted global equity markets with many countries easing coronavirus-driven lockdowns, although simmering U.S.-China tensions over Hong Kong and other issues, limited bullion’s losses.
With U.S. stocks breaking through key levels to the upside on the charts, gold traders are being encouraged to lighten up their bullish positions, which have otherwise been supported by geopolitical issues related to Hong Kong and worries over a global recession.
At 12:21 GMT, August Comex gold futures are trading $1747.00, down $6.50 or -0.37%.
Short-term, there is no key driver for gold and that essentially raises the risk of a near-term pullback or prolonged-period of consolidation. However, with the longer-term trend up, buyers may welcome a healthy correction into a value area to give them the opportunity to re-enter the market at more favorable price levels.
Longer-term investors are also being encouraged to maintain long positions by the unprecedented government fiscal stimulus and monetary stimulus from central banks. Both have led to increased concerns over inflation. However, governments and central banks have not made any substantial increases in stimulus for weeks, which may be encouraging some investors to trim their long positions.
Putting pressure on gold today is increased demand for risky assets. The major stock indexes rose around the world on Tuesday as reopening economies, China stimulus expectations and optimism over a COVID-19 vaccine lifted investor sentiment.
If this optimistic trend continues then look for lower gold prices over the short-run. Further evidence that gold is losing its appeal as a safe-haven asset is the fact that it is weakening along with the U.S. Dollar. Historically, both move in opposite directions. When the dollar rises, dollar-denominated gold tends to fall due to lower foreign demand.
On Tuesday, investors will get the opportunity to react to U.S. reports on consumer confidence and housing. Positive data is likely to put further pressure on prices, but negative data is likely to be shrugged off since investors are showing strong signs of being more forward-looking than backward-looking at this time.
For a look at all of today’s economic events, check out our economic calendar.
This article was originally posted on FX Empire
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