Gold stabilizes and attracts safe haven anti-dollar flows on risk-off Tuesday

Gold prices were reversing last week's bearish close as investor concerns over global growth take a grip following the IMF's stark warnings and what appears to be a mixed picture when it comes to Sino/US trade relation progress, a hot topic in Davos this week. 

IMF Chair Christine Lagarde cut global growth forecast for 2019 to 3.5 percent from 3.7 percent. Speaking at the World Economic Forum in Davos, Switzerland, she said that high level of economic risks are accelerating around the globe and cited the U.S.-China trade war, Brexit and China's slowing economy as the main culprits. 

Us traders returned from a low on weekend to risk-off markets conditions with futures already in the red. During the course of the day, the dollar wilted from its safe haven highs, losing its appeal due to the US government in its 29th day of partial shutdown and weaker US yields, with the US 10 years -1.91% at 2.7320, at the lower end of the day's range of 2.724/2.780.

At the World Economic Forum in Davos, billionaire investor Ray Dalio chastised monetary policymakers for an “inappropriate desire” to tighten faster than the capital markets could handle. 

"It is difficult to see what will shake the markets out of their risk-off tone in the near term as lead indicators of growth continue to wane," analysts at ANZ Bank argued. 

All eyes on Sino/US relations and US government shutdown

All in all, gold's appeal is likely to continue in such an environment but should there be sentiment of a breakthrough with respect to 'The Wall' and the government shutdown, so long as Sino/US trade tensions continue, (U.S. officials canceled preparatory trade talks this week with two Chinese vice ministers, ahead of a higher-level meeting in Washington later this month), the dollar could well find a bid again and stall the progress of the precious metal. However, if the reflation trade dominates, that is not going to be a good environment for the greenback and gold would likely prevail. 

Gold levels

Gold turned around on Tuesday as global markets ran for cover, sending the price back above the 21-D SMA and the closing low at 1277 a dollar above the prior day's low of 1276 which has stolen attention away from the bearish 17th Jan Marubozu Japanese candlestick leaving the price actual in neutral. From a technical outlook, however, the daily MACD is still running negative although RSI is leaning bullish, leaving a mixed outlook. 

Support levels: 1279 1273 1269

Resistance levels: 1286 1288 1289