New developments in the India-China and Taiwan Strait situations! Can Powell save the stimulus bill hanging by a thread? Gold could break $2000 again this week

Monday (September 21st) Asian market early trading, spot Gold rose slightly, currently around $1950. Last week, spot gold fluctuated widely between $1932 and $1973, rebounding from the previous day's sharp drop on Friday, closing at $1950.30 per ounce, up 0.53% for the week; US Dollar Index fluctuated widely last week, fell below 93 on Tuesday and rebounded overnight, Federal Reserve The resolution continued to rise strongly until Thursday morning, reaching a weekly high of 93.63 on Thursday, but fell back below the 93 mark on Friday, closing at 93.00. It fell 0.29% for the week.

Geopolitical situations continue to be the focus of risk sentiment.

According to recent reports from Indian media outlets such as Opindia.com and India Today, in the border standoff with China, the Indian army has occupied six new highlands along the Line of Actual Control (LAC) in eastern Ladakh. The new highlands include Rachana La, Rezang La, Mokhpari, Gurung Hill, Magar Hill, and the highest peak on the Finger 4 ridge. This puts the Indian army in a more advantageous position than the Chinese army in the difficult mountainous terrain. India Today reported Dow Jones that these peaks are strategic locations on the Sino-Indian border that the Indian army newly controlled in September.

According to The Indian Express on September 19th, Indian police said on Saturday that Indian freelance journalist Rajeev Sharma was arrested for allegedly passing sensitive information to "Chinese intelligence agencies." Indian police said he was also found to be in possession of some classified defense-related documents. The investigation is ongoing, and further details will be released in due course. A Chinese woman and her Nepali companion were also arrested; Indian police claim they were arrested for paying the journalist large sums of money through shell companies.

Hu Xijin, editor-in-chief of the Global Times, pointed out that India recently arrested a "Chinese spy," a freelance journalist named Sharma, 61 years old. Interestingly, when announcing this news and reporting on the matter, the Indian side highlighted Sharma's past contributions to the Global Times, which could create negative associations with the Global Times. The Indian side alleges that this person came to the attention of Chinese intelligence officers after writing articles for the Global Times and gradually began selling Indian defense information to China.

The latest news from the Taiwan Strait situation. According to Taiwanese media reports on Sunday (September 20th), on the 19th, two IDF fighter jets of the Taiwanese Air Force were surrounded by six PLA fighter jets while carrying out a drive-away mission. These two IDF fighter jets belong to the 3rd Squadron of the Taiwanese Air Force, stationed at the Ching Chuan Kang base in northern Taiwan. After an emergency takeoff on the 19th to respond to the PLA's actions, near the so-called "midline of the strait," these two IDF fighter jets were surrounded by six PLA fighter jets at an altitude of 5000 meters. According to Taiwanese media, the six fighter jets deployed by the PLA were all J-16 fighter jets.

A Taiwanese military official said that in the face of PLA military aircraft disrupting Taiwan, because the true intentions behind it cannot be determined, the Taiwanese military maintains a non-aggressive attitude to avoid accidental conflict. Recently, personnel have also been sent to the Air Force Combat Command for training and education, requiring pilots to strictly follow regulations. The military official emphasized that although both sides claim not to fire the first shot, it does not mean that they really cannot fire. The key lies in the timing of "exercising the right of self-defense," which needs to fully consider international law and other regulations, but "if the Taiwanese military is attacked, we will definitely fight back."

Regarding the US-China situation, US President Trump said on Saturday (September 19th) that he has approved in principle a deal for Oracle and Walmart to partner with the popular video-sharing app TikTok, which will avoid being shut down. Trump told reporters: "I support the deal—if they get it done, that's great, and if they don't, that's fine. I've approved the deal conceptually."

This outcome could enhance Oracle's position as a company capable of handling challenging computing workloads and help resolve geopolitical disputes between the US and China. According to US Treasury Secretary Mnuchin, the new company will be called TikTok Global. The Chinese government must now sign off on the deal to move forward.

Regarding US domestic political and economic affairs, Federal Reserve Chairman Powell will appear before a House committee on Wednesday and Thursday (September 22-23) to testify on the coronavirus crisis, and US Treasury Secretary Mnuchin will also appear at the hearing on the 22nd. In addition, on the 24th, Powell and Mnuchin will once again appear together before the Senate Finance Committee to report on the quarterly implementation of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).

The two leaders, who control the fiscal and monetary situations respectively, will appear together, which may determine whether market sentiment will tend towards risk preference or risk aversion. In previous interviews, Powell has emphasized the need for continued monetary policy support and has increasingly emphasized fiscal support. He said that monetary policy has limited effects and called for federal government intervention.

Last week, Republicans and Democrats were again deadlocked on a proposed $1.52 trillion new fiscal stimulus package. Since passing a $3 trillion aid package in May, Republicans have wanted to reduce the size of the second round of aid. Unexpectedly, however, the market's reaction to the failure of the bill has weakened, perhaps indicating that the market has already anticipated the lack of compromise between the two parties to some extent. But there is good news: US Democrats and Republicans reached an agreement on a temporary spending bill over the weekend to avoid a US government shutdown in the new fiscal year.

Future Outlook: Bullish sentiment warms, gold expected to break $2000 again?

For gold bulls, although gold prices did not make a major breakthrough last week, this week is still full of opportunities. Among them, the following two bullish factors are the biggest reliance for bulls.

First, the market's bullish sentiment towards gold has warmed up for several consecutive weeks. According to the CFTC's position report, as of the week ending September 15, speculative long positions in COMEX gold futures increased significantly by 11,339 contracts to 324,512 contracts. Even the gold ETF, whose recent capital inflows have been weak, reversed last week. Holding data shows that the world's largest gold ETF—SPDR Gold Trust—saw a significant increase of 12.85 tons on September 19, the largest increase in nearly three months, while the ETF had been mainly reducing holdings for several consecutive weeks before that.

Second, from a technical point of view, gold prices have also shown an opportunity for a breakthrough. Analyst Rajan Dhall analyzed that although the Federal Reserve did not provide enough stimulus, leading to a slowdown in gold's rise last week, it is expected to continue to fluctuate sideways this week. However, if key price points are broken, gold prices may still resume an upward trend.

This week, gold needs to watch the resistance level of $1973.64. Once this resistance is broken, gold will reopen an upward channel, targeting $2000.