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Gold: Bulls remain on defensive above 23.6% Fibo, but struggle through 21-D SMA

  • Despite the risk-off tone on Friday, gold dropped 0.4% to USD1223/oz.
  • Gold is currently trading at $1222.41/oz with a high of $1224.79/oz and a low of 1222.17/oz. 

After rising from a low of $1196, the precious metal dropped on Friday despite there being a risk of mood with investors returning in the US from Thanksgiving Thursday for just half a day's trade on Wall Street. 

On light liquidity, the Dow and the S&P500 were both down 0.7%, and the Nasdaq down 0.5%. (Oil prices also collapsed on Friday night, with WTI down 7.7% and Brent down 6.1%). US yields, the US 10yr treasury yield dropped from 3.07% to 3.04%, while 2yr yields moved in a slightly lower range of between 2.80%-2.82%. 

Meanwhile, we have Fed speakers and the FOMC minutes coming up this week, ahead of next month's Fed meeting. The Fed fund futures on Friday continued to price the chance of the next rate hike on 19 December at 75% and the dollar reached highs just shy if the 97 handle as the main culprit for such a decline in gold - (Gold for December delivery on Comex fell $4.80, or 0.4%, to settle at $1223.20/oz an ounce settling at 12:30 Eastern time, about an hour early for Black Friday and rose less than 0.1% for the week).

Eyes on the Fed

With respect to the FOMC minutes, markets are looking for an optimistic tone, but nothing that is likely to create too much of a positive theme considering it will not be anything new, although could well underpin the divergence between central banks considering the recent flop in EZ data and ECB expectations - Which, ultimately, should be positive for the greenback and weigh on the price of gold. 

"Markets will carefully watch whether or not Fed Chair Powell signals concern about headwinds or a potential pause in policy. We expect him to remain cautious but still upbeat on the US outlook, which should be hawkish given recent market pricing (now one fewer hike in 2019)," analysts at TD Securities explained. 

Gold levels

Gold ended at a 2-week high mid-week last week, although the price struggles to gain traction through the 21-D SMA and found tougher resistance around the 38.2% fibo at $1,238. However, gold is in consolidation and while above the 23.6% Fibo retracement at $1208, bulls remain on the defensive and look to target the 50% fibo at $1262. On the downside, the bears need to break below the 61.8% Fibo at $1,192/oz.

Author

Ross J Burland

Ross J Burland, born in England, UK, is a sportsman at heart. He played Rugby and Judo for his county, Kent and the South East of England Rugby team.

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