Spot gold was down about 0.2 percent at $1,290.01 per ounce by 0750 GMT, after touching its lowest since March 8 at $1,286.35 on Friday.
U.S. gold futures fell 0.3 percent at $1,294.80 an ounce.
· Share markets rallied after data showed factory activity in China unexpectedly grew for the first time in four months in March.
· “The most extreme part of the global growth slowdown panic has subsided a little bit and the Chinese data is responsible for that, but it is a single data point which should be backed by more data,” said Kyle Rodda, a market analyst with IG Markets in Melbourne.
“We are getting a lot of data from across the globe (this week) so the global growth story and the fears related to that will be tested in the very short term.”
The U.S. retail sales and manufacturing PMI data from the United States is due later in the day.
· “Though Asian PMIs have demonstrated for respite in the current term, we opine that a synchronized economic slowdown remains in place in lieu of weakness in both domestic and foreign demand,” Phillip Futures wrote in a note.
“The precious metal though facing bearish pressures will receive strong support from growing economic headwinds.”
· Global demand for gold in 2019 will rise to the highest in four years as higher consumption by jewellers offsets a fall in purchases by central banks, an industry report said on Monday.
· Investors are also keeping a close watch on the trade talks between the United States and China, set to resume later this week in Washington with a Chinese delegation led by Vice Premier Liu He.
U.S. President Donald Trump said on Friday that negotiations with China were going very well after top trade officials from both the countries wrapped up in Beijing.
· “Though we’ve seen some kind of retracement in gold, it remains very much supported around the $1,260 and $1,280 an ounce level,” said Hitesh Jain, vice president, Yes Securities.
· Indicating investor sentiment for bullion, speculators increased net long position in COMEX gold for the second straight week in the week to March 26, data showed on Friday.
· GOLD TECHNICAL ANALYSIS
Gold prices still look to be carving out a bearish Headline and Shoulders chart pattern. Confirmation of the setup on a daily close below neckline support at 1282.83 initially exposes the 1260.80-63.76 area but ultimately implies a descent toward the $1200/oz figure. Alternatively, a turn back above resistance in the 1303.70-09.12 zonetargets 1326.30 next.
· Gold had another big week but this time on the downside abrogating the continued bullish trend by breaking through the support. The $40 week was an eventful one where the gold made a higher high at $1324 but eventually failed to capitalize by falling through $1300 with substantial ease testing the support at $1284-$1286 region credited to a rising dollar on account of better than expected economic data coming from America and continued turbulence in Euro and Pound due to Brexit woes. This signals a pause in the bullish trend allowing the bears to have some color.
On the chart –
Gold suffered a breakdown as the long term trend line was broken and the flag which was in formation since the gold started its upward rally from $1180s finally succumbed causing the atmosphere to turn bearish . A test of the breakout area around $1236-$1240 cannot be ruled out. We have 2 scenarios –
1. Gold finally broke down which for the moment abstains long trade apart from scalping unless the trend reverses and gold breaks out of the flag again.
2. Short trades come live after a long wait. Gold closed below the support line, till this is held it can move towards $1284. Once this is broken it can head towards $1274. If this is taken out it can sink further to $1260.
Prices tumbled, with the most frequently mentioned factors being bouts of U.S. dollar strength, coupled with futures traders opting to exit the market instead of rolling their positions from the April to the June contract, which is now the most active month.
Daniel Pavilonis, senior commodities broker with RJO Futures, looks for gold to start recovering from Thursday’s sell-off, much of which he chalked up to traders exiting their futures positions in the April contract instead of rolling over into the June. So-called “weak hands” who got into gold as it moved above $1,320 decided to get out when the market turned around and sold off, he related.
“It was a washout,” he said. “The roll hit it and we had a strong dollar that caused some downside momentum. I think the weakness is out and we can build up again.”
Adam Button, managing director of ForexLive, said gold should get a lift from better risk sentiment.
“The Federal Reserve's preferred inflation indicator, the personal-consumption expenditure index, fell in January against anticipation of a rise,” said Richard Baker, editor of the Eureka Miner Report. “This dropped 10-year inflation expectations to November 2017 levels. Fortunately, Treasury yields also fell this week, maintaining real rates around a low 0.5%. This and the re-emergence of negative 10-year bond yields in Germany, Switzerland and Japan maintain a bullish environment for gold.”
Sean Lusk, director of commercial hedging with Walsh Trading, pointed out that buying has re-emerged below $1,300 after a fund washout. “All of the uncertainties – regarding Brexit and everything else – will draw buying back,” Lusk said.
Both Kitco participants in the poll look for higher prices. “I am bullish from these levels,” said Peter Hug, global trading director. Jim Wyckoff, senior technical analyst, said the market “got too oversold in its latest downdraft.”
Charlie Nedoss, senior market strategist with LaSalle Futures Group, was the only Wall Street participant who correctly called for lower gold prices in the last survey. He looks for gold to fall again. He pointed out that gold has now put in a series of lower daily highs and lower lows, and the June futures fell below the 20-day average of $1,307.80.
“The market got ahead of itself,” he said, referring to the rally that occurred prior this week’s pullback.
Colin Cieszynski, chief market strategist at SIA Wealth Management, also said he is bearish on gold for next week. “The recent failure to retake $1,325 and subsequent [decline] appears to have carved out the right shoulder of a head-and-shoulders top and arrives at a time when gold is moving from its stronger season of the year into its weaker season of the year, which runs through to the late summer.
· Among other precious metals, spot palladium was down 0.1 percent at $1,382.86 an ounce, having declined more than 11 percent last week.
Silver was down 0.2 percent at $15.11 an ounce, while platinum rose 0.5 percent to $849.47 an ounce.
Reference: Reuters, Daily FX, Trading View, Kitco
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