Gold

Gold slipped more than 1 percent to its lowest in 6-1/2 months on Monday as the greenback strengthened and an ongoing U.S.-European Union trade spat pressured precious metals. Spot gold ended at $1,242 per ounce.

Bullion embarked on a downward trend since July due to a firmer dollar and escalating trade friction, as traders interpreted. But we believe this round of decline was triggered by deflationary market environment worldwide - a bad news for inflation-hedging gold, as monetary tightening picked up after Donald Trump’s inauguration as U.S. President, while non-U.S. economy’s tightening came short of market consensus.

Higher rates tend to strengthen the dollar and boost bond yields, better safe haven amid rising global trade tensions. Easing geopolitical tensions, in euro zone and Korea Peninsula in particular, also reduced the appeal of non-yielding bullion.

On chart, gold has breached below the key support of $1,248, and will test the next support at $1,236. A reversion can be hardly expected despite that gold is already in the oversold range as shown by the RSI Index. Bargain-hunting is not recommended in the near term. Investors shall continue to short at highs amid current environment. In terms of volatility, investors are recommended to stay on the sidelines due to relatively subdued volatility and limited room for profits.

On Wednesday, July 4, trade will halt early for the U.S. Independence Day holiday. Investors awaited minutes of a June Federal Reserve meeting on Thursday and U.S. employment data on Friday.

Silver

Silver was down 1.4 percent at $15.8295 an ounce after hitting $15.73, the lowest in 6-1/2 months. Like gold, investors shall watch the support at $15.8, and look at the next support at $15.6 if the level is crossed below. Any further loss can be limited at current multi-year lows, which cannot be perceived as a good entry point.

 
Dealing Room, ICBC Beijing Branch
                       Qin Gang