Gold Prices Continue to Fly as US and China Tensions Remain High

The price of Gold (XAU/USD) at the latter stages of the week, commenced aggressively moving to the upside, the highest levels in seven years.

As can be seen on the naked monthly chart, the bulls pushed the price to a territory last seen back in November 2012. The wick that was produced in the month of April was successfully filled, leaving the door open to greater moves to the north. (Further analysis below)

The further boost was provided to the precious metal, on the back of the increasing tensions between the US and China. It was announced that the US has introduced new export controls designed to make it harder for the Chinese tech giant Huawei to get its hands on semiconductor technology.

Semiconductors are crucial to microprocessor chips as well as transistors, which makes them an essential part of electronics like computers and mobile phones.

The latest changes by the US government prevents any manufacturer that uses US technology and software in chip design to make semiconductors, from selling or shipping the semiconductors to China.

Anyone wanting to export the technology to China must seek US government permission to do so, which follows on from action taken a year ago to prevent Huawei from accessing US-made semiconductor chips.

This means that even when the semiconductors are manufactured outside the US, but are based on licensed US technologies, then any transaction with China will require US approval.

The US government is concerned that Huawei could engage in spying for the Chinese government, given that Chinese state law requires individuals and entities to cooperate with the intelligence services if asked to.

Huawei, the second-largest mobile phone manufacturer in the world and the world leader in 5G technology, has repeatedly denied the allegation that it spies for the Chinese state.

At the heart of this dispute is a battle for dominance of the next-generation technologies including 5G, and at the moment China has the lead over everyone else in 5G.

The US and its Western allies believe that China attained its current technological status through industrial espionage and intellectual property theft. US President Donald Trump is determined to disrupt China's progress in this area.

China has threatened to retaliate against US companies placing them on an "unreliable entity list", thereby making it difficult for them to do business in China.

Technical points

XAU/USD from mid-April had been consolidating, moving within a narrowing pennant structure via the daily chart view. Technically it was subject to a breakout, but also fundamentally, given the growing economic concerns and US-China tensions. There is further room for the price to continue pushing higher, with the $1780-1800 region in sight. Dips would likely present opportunities for longer-term swings.



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