Gold almost erases its Monday's losses as USD is pulling back

Gold bulls break above the 1,290.00 handle amid USD correction.
The FOMC’s minutes on Wednesday should be the next market mover for USD and gold alike.

Flavio Tosti Independent Analyst

Gold is currently trading at around $1291.00 a troy ounce down 0.14% on Monday.

In Asia, gold fell from the 1,292.00 region and found an intraday floor at 1,282.05 in early Europe. The yellow metal rebounded and is trading now in the 1,291.00 region.

Gold initially slid on Monday as news from constructive talks between the United States and China sent a wave of optimism across markets. Major stock indices and USD were seen higher.

Mnuchin, US Treasury Secretary said: “we are putting the trade war on hold. Right now, we have agreed to put the tariffs on hold while we try to execute the framework,” while Chinese foreign ministry spokesman commented: “China has never hoped for any tensions between China and the United States, in the trade or other areas.”

The US Dollar Index (DXY) which is mainly inversely correlated to gold broke higher to a new multi-week high at 94.06 in early Europe. However, the index is now correcting its last advance as it is trading in the 93.68 region at the time of writing.

The next market-moving event for gold and the USD is likely going to be the FOMC’s Minutes on Wednesday at 18:00 GMT. Investors will look for clues of rising growth and inflation which can send the USD higher and gold lower from current levels.

On the broader picture, gold prices remain under pressure as inflation in the US is set to go higher and the Federal Reserve is expected to raise rates at least three times in 2018. Investors are getting out of gold and turning to USD for the interest rates it yields.

Gold 4-hour chart

The main trend is bearish as the market is trading below its 50, 100 and 200-period simple moving averages on the 4-hour chart. Supports are seen at the 1290.00 handle, 1281.70 swing low and at 1270.00 figure while resistances are seen at 1296.92 swing high and at the 1300.00 figure.

Author

Flavio Tosti

Independent Analyst

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