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Market News Gold trading reminder: Consumer confidence has dropped to a six-month low, and the bulls are steadily welcoming the "small non-farmers"

Gold trading reminder: Consumer confidence has dropped to a six-month low, and the bulls are steadily welcoming the "small non-farmers"

In the Asian session on September 1, spot gold held steady at around 1813. On Tuesday, US consumer confidence fell to a six-month low in August, and the price of gold rose slightly. ADP employment data will be welcomed within the day.

2021-09-01
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On Wednesday (September 1) Asian time, spot gold held steady at around 1813. On Tuesday (August 31), the price of gold rose slightly. The consumer confidence index in the United States fell to a six-month low in August. The US dollar index once hit a low of more than three weeks. The cooling of risk sentiment also helped gold prices rise.

In the day, we will focus on the August ADP employment in the United States and the August ISM manufacturing PMI.


Fundamentals are bullish


[U.S. consumer confidence index fell to a six-month low in August]

US consumer confidence fell to a six-month low in August, indicating that worries about the delta strain and rising prices are dragging down the economic outlook.

Data released on Tuesday by the World Large Business Research Association showed that the consumer confidence index fell to 113.8 in July from 125.1 after the previous month’s revision. Economists surveyed previously estimated it to be 123.

These data show that the spread of the delta strain has weakened consumer confidence in the economy and may curb service industry consumption. The recent surge in the number of COVID-19 infections has weighed on restaurant bookings, air travel and hotel occupancy rates. At the same time, the increased spending by Americans in supermarkets and gas stations may further suppress consumer confidence.

Lynn Franco, senior director of economic indicators at the World Large-scale Enterprise Research Association, said in a statement, "Worries about the new crown virus strain and concerns about rising gasoline and food prices have affected people's views on the current economic situation and short-term growth prospects."

The Economic Status Quo of the World Large Enterprise Research Council fell to 147.3, the lowest level since April. Consumers’ perceptions of the current business environment declined, and the economic expectations index fell to a seven-month low of 71.4.

[The three major U.S. stock indexes closed down slightly]

The US stock market closed slightly lower on Tuesday, with the S&P 500 and the Dow both falling about 0.1%.

(S&P 500 daily chart)

After all set record highs in the second half of this month, the three major stock indexes were under pressure on the last day of August due to technology stocks. Before Tuesday, the S&P 500 index set a record closing high on four of the five trading days.

The S&P 500 index rose 2.9% in August, marking the seventh consecutive month of gains. The Dow Jones Industrial Average and the Nasdaq Index rose 1.2% and 4%, respectively.

This performance reflects investors’ confidence in the US stock market, which stems from the Fed’s continued dovish tone of reducing its massive stimulus plan.

Although economic growth and a strong recovery in corporate earnings have boosted the US stock market, investors are worried about the rise in the number of new cases and the Fed’s policy path.

[The U.S. dollar hits a low in more than three weeks]

The U.S. dollar fell to a low of more than three weeks against a basket of currencies on Tuesday. Investors will pay attention to the US employment data released later this week to understand the Fed’s possible monetary policy path.

(Daily chart of the US dollar index)

Fed Chairman Powell said at the Jackson Hole meeting last Friday that the Fed may begin to reduce its bond purchase plan this year, but it is not in a hurry to raise interest rates. Since then, the U.S. dollar has been trending hard.

Erik Bregar, Director and Head of Foreign Exchange Strategy, Exchange Bank of Canada, said: "If the employment figures are disappointing, there is another reason for the euro/dollar to go higher again, because all the doves will come out and say that the Fed will not Will reduce debt purchases."

The U.S. dollar once shrank part of its decline. Prior to this, the S&P/CoreLogic Case-Shiller 20-major city composite index showed that the price of single-family houses in 20 major cities in the United States in June set a record high compared with the same period last year.

Subsequently, the U.S. dollar fluctuated. In August, the Chicago Purchasing Managers' Index was worse than expected, which reduced the decline of the U.S. dollar. However, after the Conference Board Consumer Confidence Index fell below expectations, the U.S. dollar resumed its downward trend. . Concerns about the soaring number of new cases and rising inflation have hit the economic outlook.

Fundamentals are bad


[Knot said Eurozone inflation may prove that the European Central Bank can end the crisis model]

Klaas Knot, member of the European Central Bank’s Management Committee, said that the euro zone’s inflation outlook may have improved significantly, which is enough to prove that the European Central Bank has reason to immediately slow down its stimulus, end the pandemic emergency debt purchase program (PEPP) in March, and then return to pre-crisis financial discipline.

When the Dutch central bank governor talked about the policy options that will be discussed at the management committee meeting next week, Knot said that he hopes that the final decision will not contradict the end of the bond purchase plan in March next year. " This will mean slowing down the pace of purchases. "

Although the current inflation rate has reached the highest level in 10 years, the European Central Bank has adopted a more cautious approach than other global central banks such as the Federal Reserve. In the prospect of a resumption of the epidemic, it maintains ultra-loose policies to support Europe's fragile economic rebound.

Some officials, including Knot, insist that a positive economic outlook means that the current emergency policy period should be clearly defined. His colleague Robert Holzmann said in another interview on Tuesday that improved economic prospects will necessitate a reduction in bond purchases.

The European Central Bank will preliminarily debate next week whether to maintain a higher pace of debt purchases. The management committee also needs to decide in the next few months whether to extend or end its large-scale debt purchase plan in March next year, and how to continue the more traditional QE plan, the Asset Purchase Project (APP).

Knot said that the two plans were discussed and formulated in completely different environments, so the initial assessment of the proportions was also completely different. "Some of the flexibility of PEPP runs counter to some of APP's safeguards."

This shows that Knot will be one of the hawkish members of the European Central Bank and believes that APP should maintain its stricter rules and the purchase amount should be commensurate with the economic scale of each country.

[August 31 gold ETF holdings: SPDR gold holdings decreased by 1.46 tons]

According to the data of gold ETFs on September 1, the world's largest gold ETF-SPDR Gold Trust held 1,000.26 tons of gold as of August 31, a decrease of 1.46 tons from the previous trading day, a record low since April 13, 2020.


[The use of the Fed's overnight reverse repurchase tool hit a record high]

The oversupply of funds in the U.S. money market has caused investors to deposit funds in a major instrument of the Federal Reserve to a new high.

According to data released by the New York Fed, 82 participants in the Fed's overnight reverse repurchase operation on Tuesday invested a total of US$1.19 trillion in the tool, which exceeded the previous record high of US$1.147 trillion set on August 25.

Given that Wednesday enters the new month, the use of this tool is expected to decrease, but because there is almost no sign of a low tide of massive funds, demand will eventually rise.

Data Preview


In the day, we will focus on the August ADP employment in the United States and the August ISM manufacturing PMI.

ADP employment data is a leading indicator of consumer spending and accounts for the majority of overall economic activity. Two days before the official non-agricultural employment data released by the Ministry of Labor, it is regarded as a leading indicator of non-agricultural data.

Small non-agricultural accidents recorded 330,000 in July, but the non-agricultural employment population increased by nearly one million in July, testing the prospectiveness of small non-agricultural data. The small non-agricultural employment is expected to rise sharply to over 600,000 from the previous value, which may have a certain negative effect on the price of gold.

The ISM manufacturing PMI slowly declined after reaching its highest point in March. The delta virus epidemic has also brought a greater impact to the manufacturing industry. The PMI is expected to continue its downward trend, which may have a certain bullish effect on gold prices.

In general, the price of gold continues to stand above the 1800 mark and above the 200-day moving average. The pattern is relatively favorable for the bulls, and the price of gold is expected to rise further.

(Spot gold daily chart)

GMT+8 8:40, spot gold was quoted at $1813.04 per ounce.
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