Gold Good To Go Higher

Intermediate
  • After a quiet week, do not think gold will sleep over the summer
  • U.S. / China and U.S./Iran are potential flash points
  • Fed policy now looks neutral to easier…a good plus for gold

The market for gold closed on Friday at $1284.30 (-1.10 or -0.09%); this was nearly $10 higher than at Monday’s opening. Much of the week’s activity was poured into Thursday ahead of the long U.S. weekend, although it has to be accepted that as May winds down it does appear many market participants have already set about squaring their books for a quiet summer.

That would be a risky assumption as on the global macro/geopolitical stage there are tensions between the U.S. and China over trade and the U.S. and Iran may be veering toward a military skirmish or two.

Therefore, taking too relaxed an attitude may be the wrong approach. Typically, the lower activity and the thinner liquidity we see every summer, creates opportunities for larger price dislocations when a major headline hits the wires. So, for a risk-off asset like gold, one should always keep an eye open during the seemingly sluggish summer.

After the busier trading of Thursday, Friday trade was calm apart from a little selling pressure during the European session. However, $1280 has shown itself to be a strong level of support as we close the week.

Gold-One-Month-26-05-19

Source: www.investing.com , Spotlight Ideas

The chart shows that gold has settled at an area that was a resistance point up until May 12 with a short-lived break higher to $1304.

Right now, I can see several positive drivers for higher gold prices:

1) More equity market volatility

2) More rapidly-than-expected slippage in US growth as the trade dispute drags on

3) Earlier than expected Fed rate cuts

Also do not rule out a move by China to accelerate its diversification out of U.S. Treasuries into gold (as Russia has done in recent months. This may be accelerated as a direct result of the latest U.S. moves on increasing tariffs on Chinese goods and on specific moves to create obstacles for Huawei. 

Are the tariffs that rump has imposed so critical? Afterall the gradual decline in the parity of the Yuan against the Dollar has partly mitigated the effects of the initial tariffs on the cost of Chinese goods in the U.S.

Meanwhile the latest minutes from the Fed allayed fears of any interest rate increase during the rest of this year.  Indeed, the current odds suggest the higher prospect is for a possible rate cut later this year. That itself would be positive for gold.

Summary:

Buy now target 1304

Stop at 1250

Comments on this analysis


Latest News

gbpusd chart
Pound recovery aims GBPUSD for key resistance at 1.2814

A rebound for the GBPUSD Forex rate this week, but the midweek surge has primarily been driven by broad US Dollar weakness. US$ losses have been a reaction to the Fed Meeting on Wednesday (19th June 2019), where the Federal Open Market Committee (FOMC) opened the door to a rate cut, expected in July, with … Continued

nasdaq
Nasdaq Points Up; USDTRY Getting Ready For More Weakness

NASDAQ should remain in uptrend, because we don’t see a completed five-wave cycle yet, so current three-wave decline can be only part of a corrective wave iv that can find support ideally around previous wave iii) swing high and 7600 – 7595 levels and from where may see a continuation higher for wave v of … Continued

audusd
AUDUSD and NZDUSD rebounds question bear trends

Positive comments from US President Trump regarding a likely meeting with the Chinese President Xi Jinping at the G20 Meeting in Osaka, Japan. This sparked hopes of a resumption of trade negotiations, increasing investor risk appetite and sent riskier assets higher, with global stock indices posting firm gains on Tuesday. Furthermore, the “risk currencies”, the … Continued

ftse 100
UK benchmark index, the FTSE 100, aiming higher

Global equity averages have retained their short-term positive outlooks from the strong rallies at the start of June, consolidating these recovery efforts over the past week. The UK benchmark stock average, the FTSE 100 is in similarly positive mode, but also bolstered by Sterling weakness against the US Dollar and Euro (GBOUSD low and EURGBP … Continued


Forex Brokers in your location