Gold created another 52 week high before retracing back to end in negative after 4 weeks of rally as U.S – China trade tensions eased but only to boil back again in the weekend as both countries imposed fresh tariffs. This uncertainty in trade wars which now is taking shape of currency wars along with slowing global economies (inverted yield curve) continue to boost the demand of this yellow safe haven. As the calendar ticked September, another big event of “Brexit” looms and it should continue to put pressure on riskier assets further escalating the demand for gold . Prevailing conditions cannot be better for higher gold prices as the world is on the edge of recession. To watch next week – PMI and payroll data and other important data.
In the chart –
Gold posted a negative return after 4 weeks after hitting a fresh 52 week high as investors likely lightened positions before the start of the holidays along with the month end adjustment. Prices remained volatile due to erratic news flow as investors juggled between riskier and risk-free asset class causing the already heightened confusion and uncertainty to bloat further. On technical front $1506-$1510 becomes a massive support marked by black line continuing the set pattern of equidistant supports from $1162. We have 2 scenarios –
1. Gold closed above the support, till this is held it can move to $1527. Once this is crossed it can rally till $1541. And if this is taken out it can climb back to $1554 and next $1571.
2. Short trades continue to remain off the table as bullishness prevails except scalp trades.
Bullish view – Bulls made a fresh 52 week high on account of fear led rally but failed to capitalize as bullish bets lost luster at higher levels owing to brisk rally and easing of U.S – China trade tensions but it became a cause of worry again in the weekend as it escalated to a new level. Uncertainties revolving around trade seems never ending which should continue to push the yellow metal higher along with the continuous signals of a wide spread global recession which already is the driving factor for the recent run in the prices. Taking into consideration the above factors $1800 seems fast approaching.
Bearish bets remain in the woods in the given scenario.
On larger terms, Gold continues to remain bullish and prices are expected to head higher.
Possible trades are on both sides but mainly on upside, gold can be bought above $1527 for the targets of $1541 and $1554 with a stop loss placed below $1514. Longer term target $1571.
Dips towards support (and breakout region) can be used to create longs for the above mentioned targets.
Shorts can be useful for scalp trades only.
Reference: Trading View
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