According to Kitco, the gold market may be having difficulty attracting upward momentum as it is still quite far from the record high of 3,500 USD/ounce last month. However, investors are still hesitant to fake the precious metal as it continues to maintain support at $3,200/ounce.
In a note on Tuesday, commodity analysts at TD Securities said that gold prices remained low after President Donald Trump's "Tax announcement Day", when he introduced high tariffs on imported goods. He has since lifted these high tariffs and replaced them with a unified tax rate of 10% for all imports.
The US government has since made further adjustments to its trade policy, announcing over the weekend that it would cut tariffs on Chinese imports to 30%.
Although gold fell 3% on Monday after China-US relations improved, analysts at TDS expect the metal to continue to receive solid support.
Gold is finding support as the USD index corrects after soaring above 100 points in Monday's trading news. The recent USD index has been trading around 101.43, down 0.43% from yesterday.
Analysts predict that investment demand for gold will continue to increase as instability still dominates the global financial market. They pointed out that a large part of the new growth of gold-backed exchange-traded funds (ETFs) in the West is due to changes in the allocation strategy of institutional investors. At the same time, demand for gold from ETFs in Asia is still a driving force.
"These factors are not easy to change quickly. In the East, cash flow into China's gold funds is still increasing strongly, attracting the largest capital flow since April 24 in the last trading session, despite the US-China trade agreement.
This change in the structure of gold buyers reinforces our view of a limited price drop but ultimately reflects a stronger macro theme. The USD has not lost its role as a global reserve currency. However, it is gradually losing its value protection function," said analysts at TDS.
While investment demand remains stable, TDS notes that speculative demand from Commodity Exchange (CTAs) is still quite stable; however, they are still in no rush to sell.
"CTAs are holding a buying position but will not sell unless prices fall sharply to $3,050/ounce. This change in the structure of gold buyers reinforces our view of a limited price drop but ultimately reflects a stronger macro issue," said analysts.
