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Worst month for gold in 4 years!

HK Shares – Daily Candlesticks
Source: GKFX / MT4 (September 30, 2020)

Hong Kong shares have confirmed support at the 9200 level, a low put in place during the March rebound in financial markets.
 

TAKEAWAYS


•    US stocks see first monthly drop since March sell-off
•    Wall Street finishes green as Mnuchin keeps hope alive for a stimulus bill
•    USD jumps after ADP employment tops expectations
•    Homebuilder shares jump on housing boom
•    DAY AHEAD: Switzerland inflation, EU / UK / US manufacturing PMIs
 

GURU WISDOM


“The price of a commodity will never go to zero. When you invest in commodities futures, you are not buying a piece of paper that says you own an intangible of a company that can go bankrupt.” - Jim Rogers
 

MARKETS


The US dollar picked up on Wednesday after a 2-day drop thanks to better than expected ADP employment data where 749k jobs were added as well as some added uncertainty around the US election that created some extra haven flows. The pound gained against the euro amid hopes for a last-minute Brexit deal before the October 5th deadline and stronger than expected UK GDP figures.

Wall Street finished in the green thanks to bolstered hopes of a stimulus deal before the election after comments from Treasury secretary Mnuchin that there is one ‘last shot’ to do so. Uncertainty after the US presidential debates pulled European stocks lower, though homebuilders were a big gainer amid reports of big house price gains. Stocks in China were unmoved by PMI data confirming a continuation of the country’s manufacturing expansion.

Gold prices erased most of the previous day’s gains as some dollar strength re-emerged. Notably the talk of new stimulus which bolstered stocks offered no support to precious metals.

A shock draw in US oil inventories of 2 million barrels helped oil prices reverse declines to finish higher when expectation had been for a build of 400,000.
 

Undecided election


Since there was little real policy discussed at the presidential debate, the market moves – specifically a move into the dollar and initially out of stocks was for fear about an uncertain result. President Donald Trump caveated his plan to hand over power to Joe Biden were he to lose on it being a ‘fair’ result, whatever he defines that to be. Actually, the chance that Trump doesn’t accept the result seems unlikely, it is likely more a ploy to encourage his base of supporters to vote.
 

Lost its shine


Gold had its worst month in four years, while silver had its biggest monthly drop since 2011. The declines follow a big run-up in the price and profit-taking kicked in for gold while short-covering happened in the US dollar. There is plenty of uncertainty around the result of the US election, fiscal stimulus and what plays out in the pandemic. That has bennefited gold to date and should help put a floor under any declines since none of those factors have a known solution.
 

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