Gold: dollar makes a comeback, but gold hangs on a thread in a precarious environment at 21-4hr SMA
|- Spot gold has been as low as S1 but made an equally go of the upside as well, oscillating either side of the 21-4hr SMA and consolidating the recent rally from around $1,183 to $1,233.
- Gold is once again changing hands in a precarious position whereby markets have turned sour again but the greenback is picking up a bid, rallying back to the 96 handle.
However, gold futures were higher due to a decline in the U.S. stock market with December adding $2.70, or 0.2%, to settle at $1,230.10/oz after dropping 0.3% the prior session. The focus is on the Fed that is running off its balance sheet, forcing yields higher and a scramble to the greenback while geopolitical tensions also favour a bid in the US dollar, especially when considering the implications for emerging markets all the while that the global growth picture has been downgraded.
The US economy continues to diverge - dollar positive/ gold bearish
The US economy continues to diverge from that of its closest DM nations such as China and the eurozone and the FOMC minutes signalled that so long as the US economy continues to grow at such a pace, they will likely have no choice but to continue raising interest rates, perhaps even beyond the neutral rate of 3% - The market has all of sudden picked up on that point and hence we have seen a rally in the greenback since the release of the hawkish FOMC minutes on Wednesday.
Gold levels
A break below S1 would be significant, taking out the ascending support line and opening a run all the way back to $1,205 below S3 $1,210. However, we seem a way off from such a decline with MACD drifting sideways/bearish in bullish territory still. On the upside, R2 and $1,233 is key ahead of $1,239 1st and 2nd July double bottom lows.
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