· Gold prices inched lower on Tuesday, dropping for the first time in four sessions, as the dollar rebounded from multi-week lows amid simmering Sino-U.S. trade tensions and as bullion failed to surpass a strong technical resistance.
Spot gold was down 0.2% at $1,282.86 per ounce, as of 0702 GMT, after touching its highest since May 17 at $1,287.32 in the previous session.
U.S. gold futures were down 0.1% at $1,281.80 an ounce.
· “The price action in gold has been a little bit disappointing and pretty negative. It has not been able to break above $1,290-$1,300 despite the given background of trade tensions, pause in the Fed and volatile equity markets,” said Jeffrey Halley, senior market analyst, Asia Pacific at OANDA.
“Some of the money flows are moving to bitcoin. Seems like the cryptocurrencies are eating gold for lunch at the moment ... Also, there is nothing at present which is looking to undermine the dollar strength.”
· Against a basket of six peers, the dollar gained 0.2% to 97.806 after touching its lowest since May 16 at 97.546 on Friday.
The greenback nudged up on Tuesday against its key rivals as investors waited on more catalysts after the European Union parliamentary elections showed a polarisation of the 28-member block.
· Bitcoin, which had touched $8,939.18, its highest level in more than a year on Monday, was last up 0.4% at $8,810.82. On May 13, the cryptocurrency topped $8,000 for the first time since July 2018.
· Meanwhile, U.S. President Donald Trump said on Monday in a news conference with Japanese President Shinzo Abe that he was “not ready to make a deal with China”, the latest blow to beliefs that the two countries might reach a deal soon.
· A string of weak data from the United States late last week stirred up concerns that its protracted trade war with China has started taking a toll on the country’s economy, and promoted bets for a much-expected rate cut by the U.S. Federal Reserve.
· Signals are mixed for spot gold as it failed twice to break a resistance at $1,286 per ounce, according to Reuters technical analyst Wang Tao.
Bullion seems to have found a base around $1,270 despite failing to break much higher, analysts said.
· “Gold is set to improve and trend toward $1,300,” analysts with TD Securities said in a note.
“Lower rates, a flat (yield) curve and a growing likelihood of rising equity market volatility are all helping gold, suggesting buying the dips may well be the order of the day in the precious space.”
· “Buying the dips” will define gold’s latest trading pattern as the precious metal heads towards $1,300 in the near-term, guided by a dovish Federal Reserve and an aversion to risk amid U.S.-China trade tensions, according to TD Securities.
The precious metals sector is finally starting to benefit from some renewed risk aversion amid escalating tensions between the U.S. and China, TD Securities pointed out.
“[Gold] rebound[ed] from the a low of $1,267/oz to as high as $1,288/oz and silver jump[ed] from $14.38/oz to $14.65/oz,” the strategists said.
Another core element lending gold a hand is a more dovish perception of the Federal Reserve, TD Securities noted, adding that the U.S. central bank could cut rates sooner than expected.
“The risk from a slower global economy will drive the Fed to cut sooner rather than later, keeping the global yield curve flat and interest rates low,” TD Securities explained. “The FOMC minutes suggested rates will be on hold even if the economy improves, which has seen the USD strength abate, while rates continue to price a cut as the curve moves back into inversion, helping gold recover off the lows.”
· The start into the new week will potentially be quite unspectacular thanks to the bank holiday 'Memorial Day' in the US, shortening the trading hours. This also holds true for precious metals like gold (Trading Hour Schedule for the May 2019 Holiday Period, including Memorial Day).
That said, the market environment today will be very thin and most likely unspectacular, still, the technical picture for Gold in the coming days remains very interesting.
While the head-shoulder formation seemed to be off the table for a brief while, the technical developments and price action over the last week could deliver some tailwinds for the bears.
In fact, the Head-shoulder formation in stays in play as long as we trade below the right shoulder at around 1,310 USD on a daily time-frame.
If, over the next few days, a next stint towards and below 1,266 USD is successful, further losses in Gold are to be expected with a first projected target around 1,230/235 USD.
On the other hand: with 10-year US Treasury yields reaching new yearly lows last week, and the potential for any new trade war escalation driving a risk-off-mode in markets happening nearly every time, a sharper push higher in Gold and potentially above 1,310, remains an option, too.
· Among other precious metals, silver dipped 0.4% to $14.53 per ounce, while palladium rose 0.4% to $1,341.
Platinum edged 0.4% higher to $809.32 an ounce.
Reference: Reuter, Trading view
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