Spot gold eased 0.2% to $1,491.05 per ounce as of 0444 GMT. Prices had dropped 1% in the previous session.
U.S. gold futures fell 0.5% to $1,496.40 per ounce.
· “One of the key factors to the gold market is the outlook for global growth, and with trade developments between U.S. and China, traders are on alert,” said Michael McCarthy, chief market strategist at CMC Markets.
· Top-level trade talks are scheduled to resume on Thursday, when Chinese Vice Premier Liu He meets with U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin.
· “The market is very vulnerable to headlines. Any further news on discussions in the U.S. with negotiators in China could be very important,” McCarthy said.
· Asian shares inched up in early trade, though caution prevailed as expectations of a trade deal dimmed after Washington blacklisted Chinese companies over Beijing’s treatment of predominantly Muslim ethnic minorities and President Donald Trump said a quick trade deal was unlikely.
· The uncertainty regarding the outcome of trade talks had pushed the dollar index higher overnight. A stronger U.S. currency makes dollar-denominated gold more expensive for holders of other currencies, which could subdue demand.
The talks are to proceed ahead of a scheduled increase in U.S. tariffs on $250 billion worth of Chinese goods to 30% from 25% on Oct. 15. Trump has said the tariff increase will take effect if no progress is made in the negotiations.
Data from China on Tuesday did little to cheer markets after the services sector grew at its slowest pace in seven months in September, despite a strong increase in new orders.
“For the moment we are fairly in a trading range. There is support between $1,480 and $1,490, and resistance around $1,525 to $1,530,” McCarthy added.
· Investors now await the U.S. Federal Open Market Committee’s minutes from its September meeting, due on Wednesday, for clues on whether the Fed will cut rates at its October meeting, in what could be its third interest rate cut for the year.
The XAU/USD pair fluctuated in a relatively tight range near the $1,500 mark throughout the day before coming under strong bearish pressure and slumping to a fresh five-day low of $1,488 in the last hour.
Reports of China looking to make a trade deal with the United States (US) on parts of the negotiations both sides agree upon and to present a timetable to solve the harder issues next year provided a boost to the market sentiment and the safe-have gold struggled to find demand. As of writing, the pair was trading near $1,492, down 0.85% on a daily basis.
There won't be any macroeconomic data releases from the US in the remainder of the day and the market's risk perception is likely to continue to drive the pair's action.
· Gold Susceptible to Larger Correction as Bearish RSI Pattern Persists
The broader outlook for gold prices remain constructive as both price and the Relative Strength Index (RSI) clear the bearish trends from earlier this year, with the precious metal trading to a fresh yearly-high ($1557) in September.
However, recent developments in the RSI warns of a near-term correction in gold as the oscillator continues to track the downward trend from June, with recent price action raising the risk for a head-and-shoulders top.
The string of failed attempts to close above the Fibonacci overlap around $1509 (61.8% retracement) to $1517 (78.6% expansion) keeps the downside targets on the radar, with a break/close below $1488 (61.8% expansion) raising the risk for a move back towards $1468 (50% expansion).
Failure to hold above the monthly-low ($1459) may open up the overlap around $1447 (38.2% expansion) to $1457 (100% expansion), with the next area of interest coming in around $1412 (50% retracement) to $1422 (23.6% expansion).
· Gold Prices Forecast
Gold prices appear to be forming a bearish Descending Triangle pattern after it broke through the multi-month rising support zone (red channel). If a downside breakout occurs, traders may wait for confirmation before committing to a downside directional bias. Another sign traders will be looking for is increased selling volume if the prices breach below the horizontal channel.
If a breakout occurs with follow-through, interestingly enough, the target may be a familiar range between $1357.12-$1366.06. This lends credence to the notion that a bearish reversal pattern may be forming on the basis that it’s projected decline stops just short of a previously-traded range.
· Risk markets are marginally positive in early turnover ahead of this week’s US-China trade talks in Washington. The 15-month battle has started to inflict economic damage on a global scale and any breakthrough would be welcome, although the latest move by US President Trump may have stymied any progress before it happens. The US yesterday added 28 Chinese organizations to its blacklist – blocking these companies from buying US goods - over concerns that China is violating the human rights of Muslim minorities in Xinjiang. While Trump may be publicly saying that the US and China will do a big deal, it is likely that his latest move will just add fuel to the long-running trade war saga.
To the upside a strong break back above $1,495/oz. should see momentum building towards $1,520/oz. with moving average resistance seen at $1,502/oz. and $1,510/oz. A close above $1,520/oz. will break the series of lower highs and add some bullish impetus into the space.
· Among other precious metals, silver dropped 0.2% to $17.40 an ounce, while platinum rose 0.4% to $879.58 and palladium gained 0.5% to $1,667.76.
Reference: Reuters, FX Street,Daily FX
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