EBC Markets Briefing | Breaking news from Washington sends gold higher
Gold saw a robust gain on Tuesday as the dollar lost its shine amid risk-on sentiment. A Trump administration official on Monday said that tariffs will not be slapped on US trading partners immediately.
As Donald Trump begins his second term as US president, currency speculators are giving the dollar their strongest backing since before he was first given keys to the White House.
CFTC funds have flipped a leveraged net short dollar position against major and key emerging market currencies worth around $15 billion to a leveraged net long position worth over $35 billion - the biggest since January 2016.
Goldman Sachs last week upgraded their bullish dollar outlook citing continued US economic outperformance, supportive Treasury yields, and expected tariff shocks despite of its stretched positions.
But Morgan Stanley said that they were turning bearish on the dollar and recommend selling it against the euro, sterling and yen as the "US exceptionalism" may have been overblown.
Putin congratulated Trump on taking office hours before his inauguration in Washington and said he was open to dialogue with the new administration on Ukraine and nuclear arms.
Trump has promised to swiftly end the war in Europe to zero in on China, though it seems unlikely with concessions demanded by Moscow from Ukraine widely seen as unattainable.
Once a peace deal is sealed, gold could be negatively impacted given a more stable energy market. And European assets will be the biggest winners, especially the euro and German stocks.
Bullion remains well supported by 50 SMA, but traded around a key resistance around $2,726. If it ends up with another failed attempt, we see it retest 2,660.
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