Gold holding in the $1,700s yet lacks momentum

• Gold struggles to move higher in the $1,700s yet fundamentals support the bid.
• Trade wars, COVID-19 cases on the rise underpin the bullish case.

The price of gold is holding on in the $1,700s by the skin of its teeth within a range of between $1,701.09 and $1,705.47 in Tokyo's open. The risk mood is somewhat balanced but there is a slightly more bearish bias seeping through as the week progresses. 

Trade tensions and Dr. Anthony Fauci saying, "If you think that we have it (COID-19) completely under control, we don't, has seen global equities sink. Some US states that have eased coronavirus restrictions and reopened nonessential businesses have already begun to see an uptick in confirmed cases. This was information that came from the former FDA Commissioner Dr. Scott Gottlieb: 

Dozens of states have lifted restrictions and reopened despite failing to meet certain criteria published by the White House, including two weeks of a sustained drop in new infections.

Dr. Anthony Fauci warned senators on Tuesday that the US faces serious consequences if they open up too quickly, arguing that there will be an inevitable uptick in cases once they relax stay-at-home orders.

My concern that if some areas – cities, states or what have you – jump over those various checkpoints and prematurely open up, without having the capability of being able to respond effectively and efficiently, my concern is we will start to see little spikes that might turn into outbreaks,

– Fauci said in testimony before the Senate Health, Education, Labor and Pensions Committee.

There is a real risk that you will trigger an outbreak that you may not be able to control, which in fact, paradoxically, will set you back, not only leading to some suffering and death that could be avoided but could even set you back on the road to try to get economic recovery,

– Fauci later added.

Trade wars heating up

Earlier in the week, the Global Times tabloid, a paper published by the People's Daily, the official newspaper of China's ruling Communist Party which views are believed at times to reflect those of its leaders, wrote news that stirred the pot. The article stated that unidentified advisers close to the talks have apparently suggested that Chinese officials will revive the possibility of invalidating the trade pact and negotiate a new one. This is a space the markets are watching. 

In response to questions asked whether the US would renegotiate a deal, US President Donald Trump said, "No, not at all. Not even a little bit. I'm not interested. We signed a deal. I had heard that too, they'd like to reopen the trade talk, to make it a better deal for them."

Fed's Powell on the slate

Meanwhile, markets will be looking forward to Federal Reserve's Chairman, Jerome Powell, giving a speech tomorrow on the current issues facing the US economy.

Expectations are that Fed members will push back on the notion of negative rates, which should continue to keep a cap on gold in the near term. Meanwhile, deflationary concerns continue to constrain precious metals, and present another short-term obstacle, with the latest inflation data disappointing expectations,

– analysts at TD Securities explained. "That being said, we expect that when the dust settles, capital will seek to shelter itself from a prolonged period of negative real rates following the pandemic. In this context, we continue to see an elevated hurdle for a significant shift in CTA positioning."

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