- Gold prices picked-up a bid on fears of a global recession.
- On a break of resistance, bulls can look to the 127.2% Fibo target which is located around 1,560.
Spot gold has been travelling to the upside but met a wall at the highs of $1,524.10 from a low of $1,494.20. Futures, on the other hand, marked their highest finish since 2013 on recession sentiment bounding around the markets following disappointing data from China and the eurozone at the same time that UK's and US's 2/10-year yield curves inverted for the first time since the Global Financial Crisis.
Gold for December delivery on Comex added $13.70, or 0.9%, to settle at $1,527.80 an ounce, bouncing back from a 2% loss the prior day. Gold's sister precious metal, silver, also had a good run on the day. Spot prices rallied over 2.5%, between a range of $16.87 and $17.32. September silver added 29.5 cents, or 1.7%, to $17.28 an ounce. The gold and silver ratio was down -0.50% travelling from a high of 88.60 to a low of 87.83 as silver tends to play catch up with gold.
As for US yields, the yield on the 10-year U.S. Treasury note traded below the yield on the 2-year note, marking the first inversion of the curve since the crisis while the 3-month vs. 10-year measure of the curve has been inverted since earlier this year, signalling that current longer-term yields will not be sustained in their current interest rate environment. The markets use this indicator as a recession gauge. However, Gregory Daco, chief US economist at Oxford Economics, points out that there has been a gap of 10 months to three years between the indicator occurring and the previous recessions in the US.
Where to now?
Gold prices have continued to outperform across the FX space as the go-to place for when risk-off hits the fan and is tinkering on a surge much higher in this current deterioration of risk appetite and pending doom environment. Trump is making hard work of the trade wars and had likely shown his hand too soon in delaying the tariffs in a state of panic as US stocks crumble ahead of the 59th quadrennial U.S. presidential elections 2020, scheduled for Tuesday, November 3. While this might be some way off, time travels fast in the world of politics and markets, yet the trade war saga is not about to be resolved any time soon.
Trump needs the Federal Reserve to toe the line in which they still may well do, but only for meeting their three key objectives for monetary policy in the Federal Reserve Act which are to maximize employment and stabilizing prices, (AKA, their dual mandate), and moderate long-term interest rates - and that is where the Fed trade is playing out on gold prices - Interest rates are expected to fall and while gold doesn't offer a yield, the paradox is when compared to falling rates and downbeat global data, a reinvigorated gold most certainly will.
Gold levels
Gold has been holding territories above the psychologically important 1450s for the best part of august. In more recent trade, the 1500 level was breached yesterday to 1480 but the bulls showed their commitments and we are back onto a bullish trajectory. On a continuation, to the upside, the 1528/30s comes as a prior support area where the price was to be expected to hold initial tests. However, on a full-on break higher, bulls will look to the 127.2% Fibo target which is located around 1,560, guarding the Oct 2012 highs at 1795.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
USD/JPY flat-lines below 151.50 after soft Japanese CPI data
USD/JPY stays defensive below 151.50 after the release of a soft Japan's CPI report and mixed Industrial Production and Retail Sales data on Friday. Japanese verbal intervention also weighs on the pair amid the holiday-thinned conditions on Good Friday. US PCE inflation awaited.
AUD/USD buyers lack vigor above 0.6500 amid Good Friday trading lull
AUD/USD is trading listlessly above 0.6500 in the Asian session amid light trading on Good Friday. The Aussie pair shrugs off encouraging comments from China's FX regulator, as price action remains subdued ahead of the US PCE inflation data.
Gold flirts with record highs above $2,230, all eyes on US PCE data
Gold price flirts with record highs around $2,230 during the Asian session on Friday. The uptick of yellow metal is bolstered by the safe-haven flows amidst growing economic concerns and the prospect of interest rate cuts from the US Federal Reserve.
Optimism price could fall as nearly $90 million worth of OP tokens is due flood markets
Optimism volatility has shrunk in the ours leading to the network’s cliff unlock. It joins the likes of dYdX and Sui, which have similar events on their calendars. As token unlocks are often considered bearish catalysts, investors should brace for a reaction after the event.
Will they won’t they cut rates is the question of Q2?
There has been some significant push back from Fed and Bank of England members around the timing of rate cuts, and the Bank of Japan still haven’t physically intervened in the FX market to stem yen weakness although they are threatening to do so.