Gold on the back foot as Trump pumps up markets and trade optimism

  • Gold is currently trading at $1,295.80oz, between a range of $1,293.85oz and $1,303.40oz as the greenback picks up a bid, climbing to 97.55 (10-year yield moves up +0.88%, from 2.3910% to 2.4280%).
  • Gold has taken on a key resistance at the 23.6% Fibo target ($1,303) ahead of a look in at $1,310.

As trade wars reach a new peak, with China pledging to retaliate with tariffs on $60B of U.S. imports, gold picked up a safe haven bid to a hogh of $1,303oz, a familiar support/resistance.

"The yellow metal found a safe haven bid, as equity volatility bounced off the lows created by the "perma-hold" narrative embedded since the start of 2019," analysts at TD Securities.

"While risk markets have found support from Presidential tweets this morning, adding pressure to gold, the industrial precious complex could face opposing forces on the day as the industrial precious metals market clashes between a growing probability of a Fed cut, along with offsetting growth views."

Indeed, Trump's shift in tone on trade talks buoyed risk markets this morning, after the President noted his sentiment that the talks may be "very successful".  Should the positive mood stay on track, gold could plummet back to its origins in price, and in the meantime, 1290 is on the cards as a fair target being the 50% mean reversion of the current swing low and highs. Further down 1285 is compelling. However, on the flip side, should the market take the view that trade wars are not about to be resolved anytime soon, gold can go higher and the first target is a close above $1,303 for $1,310 and beyond.

"Considering that the highly anticipated Trump-Xi meeting is unlikely to occur prior to the G20 meeting in end-June, trade uncertainty is likely to remain a reality for the time being. Our Macro Strategy team sees a significant risk for all Chinese imports (another $325bn) to be subject to tariffs over the next month or so,"

the analysts at TD Securities explained.

Gold levels

Price has broken the trendline resistance and rallied to the 1298 target yesterday and then 1303 today, the 23.6% Fibo and familiar support resistance level. The next leg on the radar will be a close above 1310 to target 1318 and 1324. Stochastics remain overbought and a mean reversion of 50% of the rally opens 1290 and then 1285. Not favoured in the current climate, but on a continuation of the downside would target back below 1276 that guards a run down to test the 1266 lows again ahead of where 200-DMA meets that 50% Fibo down at 1254.

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