Has Gold survived the perfect storm? (Gold Outlook)

US Update

So far so good for the USD and the US economy which is the most dominating currency and barometer for major market volatility. The most interesting scenario would be, what the market would look like, if the opposite situation comes into play. A weakening US dollar is always great for the precious metal’s prices. A weakening dollar can be associated with bad business deals as in the case of China and Europe imposed tariffs which is constantly being brought back to focus amid its importance and influence on the global scene. At the same time the North Korean issue is also boosting Gold prices.

Gold’s rally was seen very impressive in the opening of 2018 after the close of 2017. The precious metal reached $1,366 per ounce. Since April 2018 until now, the shiny metal made a correction by dropping by $66 of worth. The precious metal tumbled and lost the advancement it made since 2017 when prices which were below $1,300.

X-ray technology

News coming from Australia have in focus a very useful technological advancement that measures gold in mineral samples. These samples are seen under X-ray’s that activate the Gold presence and by this they can measure the concentration level of the shiny metal. This method is a faster, safer and more environmentally-friendly method and is seen as a substitute to the traditional fire test method for gold analysis. Its most spectacular benefit is that it significantly reduces the time needed to get results from days to minutes giving the potential investors a faster decision opportunity.

As a result Australia has now an export opportunity worth $1 billion in gold mining alone, and a competitive edge for Australia’s mining industry on the global stage. Australia is the world’s second largest gold producer and the industry will benefit from the opportunity to capture more value from mined resources, as well as increased operational efficiencies, revenue and productivity.

Lately 

In the past week strong demand was seen for Gold indicating traders are in search of an instrument that can increase in value during times of uncertainty.

Even though the morale is quite low for the time being, Gold has been able to remain close to the $1,300 psychological price trading just below it, for a period of one week. In the current week, gold proved it has not made its final statement above the level of $1,300 and has somewhat survived the perfect storm which is the strengthening of the US dollar.

Conclusion

As a conclusion, we believe Gold will regain its full strength to reach higher grounds especially as the summer kicks in. If the commence of June finds the precious metal above $1,300 , the shiny metal’s demand and supply would be at the same level it started the year and the unresolved geopolitical issues will help strengthen its prices.

Technical Analysis

Gold is currently trading at approximately $1304.50

There is strong resistance at $1,304.72 Resistance level and if a clear break is viewed then a bullish market could be in play with the precious metal price moving towards the $1308.95 Resistance hurdle.

If the bears take the driver’s seat, we could see the shiny metal falling towards the $1300 support barrier and even breaching it aiming for the $1295.15 Support level.

If traders decide to remain uncertain as of the Bullion’s direction we may see a sideways movement between the 1300 Support level and the 1304.72 Resistance level.

Gold enters new era trading under $1,300 per ounce

Gold prices landed severely lower on Tuesday, trading at a $1,294.60 an ounce, on a seven-month low following economic reports on retail sales and manufacturing released from the US.

Treasury advancement

At the same time the shiny metal was under significant pressure from climbing rates in the Treasury advancement .Yields were boosted on Tuesday as well as the entire Treasury yield curve from 2-year notes to 30-year bonds, but most notable the broadly watched 10-year made a significant move and has broken into a new trend. The 10-year Treasury yield rises back above a key psychologically important level at 3%.Rising government bond yields have the effect of reducing demand for bullion which doesn’t offer a yield.

Furthermore, the U.S. Retail Sales rose for a second consecutive month in April, suggesting the economy is accelerating and boosted further the US dollar. Adding to this, the Empire State manufacturing index rose in May, similarly indicating to an improving economy.

While there are no signs of overheating, investors may be concerned that the Federal Reserve may try to slow down the economy by raising interest rates more aggressively.

Trade wars

One of the most talked about and analyzed pending issues on the global economic interest remain the trade wars. With the US trying to turn the situation to its advantage, the only current progress achieved is a hardened stance from both sides including China but as well as leaving the market on further uncertainty. In our opinion the two sides must settle down and understand each other for world-wide benefit as it is only logical that, if the biggest economies of the world are to collide, the global economic system will be affected an eventually hurt. It also must be noted, that Apple’s CEO Tim Cook has publicly urged Donald Trump to rethink the imposed tariffs as they can backfire on the US affecting also the private sector which is currently seen booming.

Inflation

Fears of higher inflation are also surging within the market as the US government is strengthening economically, as financial data suggests. In normal conditions, higher inflation must be followed by increased wages otherwise economic uncertainty prevails. Uncertainty, is what gold prices need in order to kick start increased volatility and especially on the upward.  Gold has been weakening for some time now and has broken below the 1300 psychological number somewhat indicating a new trading perspective for the precious metal.

Expectations

Surprisingly and according to Thomson Reuters GFMS Gold Survey published on May the 8th it is forecasted that gold could average at $1,360 and peak at $1,500 per ounce. They are basing these expectations on political uncertainty including the Middle East tensions and Brexit. We share the opinion that Gold has not said its last words above $1300.

 

Technical Analysis

After the sideways movement from April 23rd until May 15th, gold’s prices dropped significantly breaking in one day consecutively, the 1303.50 and the 1294.55 support lines. For the time being, prices seem to stabilize below the 1294.55 resistance line and continuously testing it, without finding success in clearly breaking it.

We see the case for gold to continue in a sideways movement for the next couple of days and then start rising again as the US Dollar bullish momentum could start fading away and uncertainty may rise further.

Should the bulls take over the market we could see gold prices breaking the 1294.55 resistance line and explore the 1303.50 resistance hurdle. Should the bears be in the driver’s seat we could see the bullion driving south breaking the 1282.15 support line and aiming for the 1274.50 support zone.

Is Gold’s recent low an opportunity or a trap?

Since mid-April we are going through some very interesting times within the financial markets, as the recent strengthening of the USD is most evident with its influence all over the world indicating the US economy is strengthening.

Backing this statement are the Treasury prices which regained strength somewhat on Wednesday after a well-received auction of 10-year Treasury’s. Market participants have shown that there is still demand for 10-year Treasury’s with decent support for this auction, as the very notable advancement of the safe heaven is becoming even more attractive for investors. Furthermore, today the market anticipates the U.S. CPI data which will also be a source of information for the outlook on the Federal Reserve’s interest rate hike path.  Weaker-than-expected data earlier this month did little to reduce expectations of a June interest rate hike. Higher U.S. rates are likely to lift the dollar and push bond yields up, adding pressure on greenback-denominated, non-yielding gold. Gold prices have been significantly decreased by the pre mentioned points however, it is our opinion that the USD’s positive run could soon end and traders would focus on other financial opportunities prevailing.

Many counteracting pending issues are not working in gold favor and that’s why it’s trading so far in May is within a very tight range.

The pending matter of trade wars between the US and China is slowly re-surfacing. From the US side their objective is to amend the trade gap in order to satisfy their own interest. An opinion expressed on Eikon Reuter’s was that the effect could be the increase of the cost on domestically manufactured products within the US. These products may not be available for consumers right away and their demand could have an inflationary effect. If inflation is not moving along with wage growth, investments in Gold could be the smartest Investment decision to make as its reaction and subsequent volatility is most probable.

Iran’s gold demand will possibly be evident for the next few months and then gradually decline as the new U.S.  Sanctions start kicking in and take effect.  Looking back when sanctions were imposed on Iran in 2012, it took two years for the country’s gold demand to start falling, according to data from the World Gold Council and history has the tendency of repeating itself in some cases. People may have the need to convert all valuable belonging to Gold in order to maintain its worth due to the ongoing weakening currency of Iran.

Conclusion

The shiny metal, which has been trading with a somewhat lethargic sideways movement during May, is considered by many analysts and traders as trading at its bottom. This current pricing could be a low that attracts more buyers for the bullion. Some consider it a brilliant investment for the next months as it is already trading considerably low compared to 2018 price action. Taking in mind the upcoming US interest rate hikes in June, could be a good chance for the bullion traders targeting a positive cash flow.

Technical Analysis

Gold sideways movement between the $1317.65 resistance level and the $1,304.26 support level is most evident on the 4 hour chart.

Very strong support is observed at $1,304 support level as it has been tested many times in 2018 but has not been breached.

Gold bulls could be waiting to be set free as the Shiny metal has not been much of an interest lately.

If traders decide to purchase the bullion we may see it moving higher towards the $1,317.65 resistance level in order to breach it and trade around the $1,322.34 resistance hurdle.

On the other hand, if the shiny metal is utilized for selling interest we could see it moving towards the $1,308.95 support level and breach it, aiming for the $1,304.72 support hurdle.

Both purchasing and selling scenarios could be affected by today’s US CPI &Core CPI rates.