· Gold quickly reversed an Asian session dip to $1298 area and spiked to fresh session tops in the last hour, back closer to the previous session's swing high.
Despite a mildly positive tone around the US Treasury bond yields, the US Dollar bulls remained on the defensive at the start of a new trading week and turned out to be one of the key factors benefitting the dollar-denominated commodity.
This coupled with some renewed uncertainty over a possible breakthrough in the US-China trade deal further underpinned the precious metal's relative safe-haven demand and remained supportive of the latest leg of an up-move.
· The uptick seemed rather unaffected by improving risk sentiment, as depicted by the prevalent bullish trading sentiment around equity markets, though might act as the only factor keeping a lid on any runaway rally.
· Moreover, investors might also be reluctant to place any aggressive bids ahead of this week's key event risk - the latest FOMC monetary policy update, which might provide a fresh directional impetus for the non-yielding yellow metal.
Hence, it would be prudent to wait for a strong follow-through buying before traders start positioning for any further near-term appreciating move amid absent relevant market moving US economic releases on Monday.
· The U.S. Fed will begin its meeting on interest rates on Tuesday, which ends with a news conference on Wednesday.
“The narrative has completely changed. A year or six months back, people were talking about policy normalisation, and now to be accommodative. With the flow of U.S. data we had, it could be quite supportive for gold,” said Hitesh Jain, vice president, Yes Securities.
Markets currently expect there will be no rate hikes this year, and are even building in bets for a rate cut in 2020.
However, if the Fed indicates a possibility of rate cut this year itself then gold prices could skyrocket, Jain said.
· “One of the most important drivers for gold is the U.S. dollar strength and the dollar is in turn beholding to the U.S.-China trade negotiations,” said Michael McCarthy, chief market strategist, CMC Markets, adding $1,290 and $1,310 are the key support and resistance levels, respectively.
· Technical levels to watch
Immediate resistance is pegged near the $1309-10 region, above which the momentum could get extended further towards the $1314 intermediate hurdle en-route $1320 supply zone. On the flip side, the $1298-96 region now seems to have emerged as immediate support, which if broken might turn the commodity vulnerable to slide back towards testing $1287-85 horizontal region.
· GOLD threatening further upside pressure nearer term as it closed higher the past week. The pair looks to move higher towards the 1,310.00 resistance zone in the new week. Further out, resistance resides at the 1,320.00 level where a break will aim at the 1,330.00 level. A turn above there will expose the 1,340.00 level. Further out, resistance stands at the 1,350.00 level. Its daily RSI is pointing higher suggesting further strength. On the downside, support comes in at the 1,290.00 level where a break will turn attention to the 1,280.00 level. Further down, a cut through here will open the door for a move lower towards the 1,270.00 level. Below here if seen could trigger further downside pressure targeting the 1,260.00 level. All in all, GOLD looks to move further higher in the days ahead.
· Gold drew support from rising channel line and recovered after hitting 1280.85. So far, it’s held above 1276.76 cluster support (38.1% retracement of 1160.17 to 1346.17 at 1275.45). Thus, there is no indication of trend reversal yet. Rise from 1160.17 could extend further. Break of 1346.71 will target key fibonacci level of 38.2% retracement of 192.070 to 1046.37 at 1380.36. For now, we don’t see enough momentum to break through this 1380.36 key fibonacci level yet.
On the downside, decisive break of 1275.45/1276.76 should confirm completion of whole rise from 1160.17. In that case, gold should have started another falling leg inside the long term range pattern. Deeper fall should then be seen back towards 1160.17 support.
· Gold prices slid back to sub-$1300 region around early Monday. Optimism surrounding delayed Brexit largely played its role to propel the yellow metal during week-start, giving less leeway to doubts over the US-China trade deal. However, latest reports concerning the UK and New Zealand growth, coupled with political drama at the Britain and the US may be looked for fresh impulse.
Gold: Technical Analysis
50-day simple moving average (SMA) at $1305 acts as immediate resistance ahead of highlighting $1311 and $1322 numbers to the north.
On the downside, $1294 and $1289 could entertain short-term sellers ahead of challenging them with 100-day SMA level of $1270.
· GOLD TECHNICAL ANALYSIS
Gold prices pulled back from support-turned-resistance in the 1303.70-10.95 area, with overall positioning hinting that a (somewhat malformed) Head and Shoulders top might be taking shape. Confirmation is required on a break of neckline support, now at 1281.91. If that is breached on a daily closing basis, the 1260.80-63.76 zone is exposed initially but the overall setup implies a measured downside objective near 1220. Alternatively, a move above 1310.95 sets the stage to revisit the February swing top at 1346.75.
· Among other precious metals, palladium was up 0.1 percent at $1,562.01 per ounce, close to a record peak of $1,567.50 hit in the previous session.
Silver gained 0.4 percent to $15.33 an ounce, while platinum rose 0.5 percent to $832.25.
Reference: Reuters, FX Street
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