Gold was seen strengthening exceptionally in response to the geopolitical incidents which dominated the news in the previous days. The shiny metal overpassed the $1,350 psychological price and advanced even further to capture its 2 years high on Wednesday, again absorbing much volatility.
Syrian tensions which are turning into a showdown between the US and Russia, currently seem to escalate further and are influencing a number of financial instruments that are sensitive to uncertainty and fear. The situation released the bulls on golds trading during the European and North American time frame which advance constantly, surprising most analysts and traders as the positive sentiment came unexpectedly somewhat. Many traders showed confidence in purchasing gold as the price was advancing and eventually touched a high of $1,365 an ounce.
On Thursday price correction was obvious as many short-term traders were eager to lock profits gained since the previous day, with the price dropping to $1,346 approximately.
Coming from a different perspective, various Portfolio Managers have noticed a vast transition of investment from the cryptocurrency market to precious metals.
A chart of Bitcoin VS Gold provided below indicates that the two instruments are moving in the opposite directions for the past 3.5 months with the precious metal following an upward movement. Gold is favored against Bitcoin as investors utilize the shiny metal as a key defensive instrument against the weakening cryptocurrency. Gold is also a more reliable asset in comparison to Crypto’s and that gives investors more of a reason to move their money from other industry’s towards the precious metal.
Viewing Gold from a demand perspective, Chinas Gold imports have been seen to double in the first months of 2018 with data accounting for 249.5 tons shipped until the end of February. This could be due to worries created from the Trade war with the US. Competition between the two biggest economies of the world may have forced the Chinese to purchase more Gold in order to boost economic confidence for the months to come. It will be interesting to see what the reaction to demand will be, now that an agreement has been reached and worries are slowly fading away.
On the other hand, the fact that the Yuan has appreciated by 3% against the USD this year may not be as attractive for gold investors as it seems to be. Chinas domestic gold price has increased by 3.3% but the international gold price advanced by 13.1%, in 2017 according to EIKON Reuters information. We could see more investments in the very popular XAU/USD as it responds more intensively and drastically, providing a more realistic view to the International market circumstances, as studies show.
From a gold miner stocks perspective, companies could gain on their earnings going forward as Gold is slowly climbing for the past 2 years and creating higher lows. It is expected that a very strong run is ahead for Gold miner stocks.
Technical Analysis
Gold has been moving in a sideways manner since the start of the year trading mostly between the $1,348.89 resistance level and the $1,308.50 support level.
The $1,348.89 resistance level has been broken 4 times in 2018 and on the past Wednesday touched its highest price of all 4 times reaching $1,366 per ounce.
If the bulls take over the gold market we could see it stabilize above the $1,350 psychological price and aim for the $1,355.77 resistance hurdle. Gold could move even higher to the $1,360.00 resistance area if any further military actions are taken on Syria as that could create stronger demand for the shiny metal.
The current sentiment for the today 12 April 2018 is bearish and indicates that some price correction is in place. If the bearish movement continues gold could move lower heading towards the $1,339.62 support level and even breach it to reach the $1,332.89 support hurdle.
