Yesterday, Bullion opened approximately were it closed on Friday trading below the $1,200 round number, making a slow start only to shoot
up by 10 USD throughout the European session. The run did
not last much, but showed some reaction and response to the
recent US-Sino news.
On Tuesday, investors leaned towards selling Gold in the early European morning, seeking safety in the U.S. dollar am id concerns of further uncertainty on global trade after the United States imposed a new round of tariffs on Chinese imports. It seems to various analysts and market participants, that Gold has changed its trading patterns and at various points’ moves independently of what is happening fundamentally or correlation wise, compared to other instruments. The recent fundamentals, that U.S. President Donald Trump on Monday announced $200 billion worth of Chinese imports was not significant, as it was broadly expected. However, the small change in detail, which was the 10 percent, a reduction from the initial 25%, had the news boosting a major’s weakness for the dollar. The ongoing trade issue works in favor to Gold as the dollar moves downward somewhat and some
of these shorts are being covered with Gold trades, picking up volatility. However, the precious metals reaction has not been as strong as expected keeping the market unsatisfied and skeptic on further movement or direction.
The opposite side of the matter must be analyzed in order to provide a more in depth investigation. In the scenario of Chinese retaliation, the US economy could be brought in a minor tight situation. This is evident with the US exempting firms like Apple from tariffs on their products. The most important thing for the US is to keep its economic strength flowing from within.
Some adjustments maybe made on the US side even though they still have the upper hand in the trade war. Gold could fluctuate on a higher range
under the retaliations fears. On the other side, Brexit is also an issue which is widely not mentioned when referring to the shiny metal market. Brexit creates huge questions as per the European Union future actions but also how the
UK will deliver after its exit. The Brits may turn to Gold, should their country go through a stabilization period, which is most certain to take place, as the dangers Brexit carries have been identified by well-known banks who are n
ow pulling money out of the UK. It was said that Deutsche bank could withdraw 450B euros out of London, indicating a storm might be on the way. Investors have an opportunity to turn to Gold were its talent as a safe haven prevails in these cases. In other parts of the world p
hysical gold buying declined, especially in Asia during the previous
week as bullion prices rebounded from recent lows, with
suppliers in India offering the metal at a discount for
the first time in over a month as the small increase in price
moderated demand. In Turkey, the economic crisis could also be
a factor which could influence Gold prices. Analysts
point out that the CBRT could turn to its Gold reserves and liquidate a significant part of it, in order to support the country’s currency. The pre mentioned scenario, strengthens as the recent rate hike had delivered
some gains for the Lira, however these were evaporated within less than a week. In our opinion, Gold remains strongly undervalued, and is living in the shadows of a looming interest rate hike by the FED which is holding the precious metal down. The FEDs plan is straight forward, aiming
for a hike path that will bring the US economy down but also
the avoidance of overheating.
Most of Gold movement during September was between the 1197.27 (S1) support level and the 1191.27 (S2) support barrier, but the shiny metal has had some periodic outbursts over the 1,200 psychological
threshold. It must be noted that levels have changed since last week, as the market has proceeded to change trend. However, Golds price action has moved higher lately and so a bullish market could be more evident during the rest of September. In the RSI indicator in the 1 hour chart above, we could see an indication of an indecisive market. If the precious metal is undertaken by a strong purchasing trend, we may see it breaching the $1,208.35 (R1) resistance level and aim higher for the $1,214.80 (R2) resistance barrier.
If Bullion is overtaken by a strong bearish movement, we could see it aim for our $1,197.27 (S1) support line and even breach it aiming lower for the $1,191.08 (S2) support hurdle.