Gold bulls seeking out a run to $1,360/oz while now testing out 10-month highs


  • Spot gold has bounced off trend line support and is at 10-month highs. 
  • Gold looks set on strong overhead resistance up at $1,360/75/oz.
  • DXY on the way down after charting a key day reversal on Friday and extending losses on Tuesday as North American traders join the party. 

Gold, as a safe haven asset, (the other currency), has been raising the market's eyebrows of late and its rally is somewhat concerning, and not just to the bears. Often, when the price of gold rallies, it is a sign that markets are on alert, fearing the worst. We have global banks downshifting gears, from the Fed to the ECB and the RBA all showing their concerns for domestic and global growth. All of their concerns have one thing in common and that is China. 

The world's second-largest economy's growth is expected to slow to 6.3 percent this year, which would be the weakest in 29 years, from an expected 6.6 percent in 2018, according to a median forecast of 85 economists Reuters recently polled. There has been an underbelly of bearishness brewing for some months, and when the Fed suddenly flagged such concerns and switch to neutral, gold started to perk up, extending the upside recovery from its late summer 2018 lows down at $1,160oz. 

Sino and US trade wars were an additional factor that had been supporting safe haven assets, including the greenback, but now that there is growing optimism over talks that have been taking place between key officials on both sides of the Pacific, the dollar is falling yet gold keeps rising which could be a fundamental shift taking place and a potential buy the rumour sell the fact play in the stock markets - This week should offer more updates on how those talks are going as Beijing delegates meet with US officials in Washington to iron something more concrete out - Many analysts are expecting an extension of Trump's tariff deadline that is due to kick in at the start of next month,  a sure positive to risk for the near term at least. 

For the meanwhile, traders will also pay close attention to this week's FOMC minutes that will help provide additional context to the Fed's recent dovishness.

"At the same time, the yellow metal could be set to receive substantial CTA buying, as prices remain anchored to key trigger levels that would imply massive length,"

analysts at TD Securities argued. 

DXY on the way down

US Dollar Index charted a key day reversal on Friday coupled with a divergence of the daily RSI. If the dollar continues to slide, then the only way is up for the precious metal. In the DXY, the 200-day ma at 95.50 is a key level to watch for on the downside. 

Gold levels

Analysts at Commerzbank explained that the gold market has eroded the 1326.17 May high and in doing so has broken into 10-month highs:

"We continue to target the 2015-2019 resistance line at 1360. The bull flag offers an additional target of 1396.33. Provided that the market holds over 1276.56, the early January low, immediate upside pressure will be preserved. Initial support is the accelerated uptrend at 1305. Support at 1276.56 guards 1246.17 the 200-day moving average. Here we would expect to see the market stabilise and recover if reached at all."

"A fall below the 1243.55 October 2018 peak would target the 1180.84 September low and would put the 1160.24 August low on the cards,"

the analysts wrote to the contrary. 

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