Gold rises as global equities retreat

Gold is rising with continued turmoil in global equities. Investors are increasing their holding in bullion backed gold exchange traded funds. Will gold continue rising?

Gold price has gained 16% since the start of 2016 as falling commodity prices intensified concerns about slowing global growth. Global equity markets fell due to resulting lower appetite for risk and gold prices started rising with heightened demand for haven assets. As major developed economies of euro-zone and Japan were having limited success in re-inflating their economies through monetary expansion and China’s economic growth decelerated, investors revised downward the likelihood of further rate hikes this year by Federal Reserve In light of increased risks for US economic growth. This resulted in weakening of US dollar, making gold less expensive for users of other currencies. Investors increased holdings of gold in bullion backed exchange traded funds with holdings of SPDR Gold Trust, the largest gold ETF, rising to 760.32 tonnes, the highest since March 2015. And if the slump in equities continues gold will attract more investments and bullish trend will continue. Today second reading of fourth quarter US GDP, personal consumption index for January and Michigan University consumer confidence index will be released. Positive surprises in readings will be bearish for gold.

XAUUSD: D1 has been rising on the daily timeframe since the start of 2016. It is above the 200-day moving average and hit a one-year high at $1260.6 two weeks ago. The Parabolic indicator gives a sell signal. The Bollinger bands are widening which indicates rising volatility. The RSI oscillator is above the 50 level and is nearing the overbought zone. The MACD indicator is above the signal line and zero level, which is a bullish signal. The 50-day moving average has reached the 200-day moving average, and if it breaches above the 200-day moving average a bullish chart pattern “golden cross” will form. We believe the upward momentum will continue after the price closes above last fractal high at 1239.95, which may serve as a point of entry. A pending order to buy can be placed above that level. The stop loss can be placed below the last fractal low at $1190.9301. After placing the order, the stop loss is to be moved every day to the next fractal low, following Parabolic signals. Thus we are changing the probable profit/loss ratio to the breakeven level. If the price meets the 1190.9301 stop loss level without reaching the order, we recommend cancelling the position: the market sustains internal changes which were not taken into account.

Position Buy
Buy stop above 1239.95
Stop lossbelow 1190.9301