XAU/USD: Current Dynamics

US President Donald Trump said last Monday that he was “not yet ready” to conclude a trade agreement with China. In his opinion, against the background of "substantial progress" in trade negotiations with Japan, duties on Chinese imports "can easily be extremely substantially raised".

Trump's statement heightened investors' concerns about the growth prospects of the global economy, since a possible escalation of the trade conflict and the introduction of duties on goods from these countries would cause damage to both the American and Chinese economies, according to economists.

In this situation, the demand for defensive assets (gold, government bonds, yen) has grown significantly in recent days.

Thus, the growth in demand for US government bonds led to a significant drop in their profitability.

The yield on 10-year US government bonds fell last week to 2.292%. On Wednesday, their yield fell to 2,229%, the lowest since February 2018.

It is possible that the Fed will still start lowering interest rates in order to support American manufacturers. And this will lead to a decrease in the dollar and the growth of gold prices.

For the 6th week in a row, the XAU / USD has been trading in a narrow range near current levels and a key support level of 1277.00 (Fibonacci level 61.8% of the correction to the wave of decline since July 2016 and ЕМА200 on the daily chart).

Increased uncertainty in financial markets and the escalation of the trade conflict between the United States and China may lead to a resumption of the bullish XAU / USD trend.

The breakdown of the short-term resistance level of 1286.00 (EMA50 on the daily chart and EMA200 on the 4-hour chart) will be a signal for the resumption of upward dynamics and growth of XAU / USD with targets located at resistance levels of 1303.00, 1312.00, 1323.00, 1345.00 (maximums of February and 2019). This is the most likely scenario.

An alternative scenario implies the breakdown of the key support level of 1277.00, the lower line of the 1268.00 range, and a further decline to the lower boundary of the downward channel on the daily chart and to the support level of 1248.00 (Fibonacci level 50%), which will create prerequisites for XAU / USD to return to the global bearish trend with the reduction targets at the support levels of 1197.00 (November lows), 1185.00 (Fibonacci level 23.6%), 1160.00 (2018 lows).

Support Levels: 1277.00, 1268.00, 1248.00

Resistance Levels: 1286.00, 1296.00, 1303.00, 1312.00, 1323.00, 1345.00, 1357.00, 1365.00, 1370.00

Trading Recommendations

Sell ​​Stop 1275.00. Stop Loss 1288.00. Take-Profit 1268.00, 1248.00, 1234.00, 1220.00, 1197.00, 1185.00, 1160.00

Buy Stop 1288.00. Stop Loss 1275.00. Take-Profit 1296.00, 1303.00, 1312.00, 1323.00, 1345.00, 1357.00, 1365.00, 1370.00