Senior Market Strategist

Total Content 241

Daily Reports 17

Gold breaks above $1,300

By David Morrison  |  29/01/2019 13:18
”gold”/

Gold rose sharply over the last quarter of 2018 as equity markets slumped. Yet investors have continued to increase their exposure to the yellow metal even as global stock indices have bounced back since late December.
 
On Friday gold broke above $1,300 and today it has added to gains to hit its highest level in over six months. Last summer gold hit a nineteen-month low of $1,160. Back then, there were several analysts who were suggesting that the precious metal could head back to its December 2015 lows and then continue its way to a break below $1,000 per ounce. However, over the next couple of months it recovered from its heavily-oversold condition and then rallied into the year-end as global equity markets slumped. Investors were desperate to push funds into safe-havens in a move which also led to gains for both the US dollar and US Treasury bonds.

Consolidation

So far this year gold has managed to consolidate above $1,280. This is quite an achievement given the sharp bounce-back that we’ve seen in equities and other risk assets since late December. It’s almost as if investors are wary of taking the month-long ‘risk-on’ move too seriously. It could be that the dovish rhetoric from the US Federal Reserve, the ECB and the liquidity injections from the People’s Bank of China have simply increased concerns over the global economic outlook. After all, why would the world’s major central banks suddenly turn dovish unless they were worried about the global economy? This is especially the case given the ongoing trade dispute between the US and China and as several US companies blame weakening Chinese demand for disappointing corporate results. Yesterday it was Caterpillar and Nvidia who cited China’s slowdown as a reason for downbeat forward guidance. This follows on from Apple’s sales warning earlier this month in which it blamed China for falling iPhone demand. We’ll see the effects of this tonight when Apple releases its quarterly update after the bell.

US-China trade dispute

Yesterday the US charged employees of Chinese telecommunications giant Huawei with breaking sanctions against Iran and the theft of trade secrets from T-Mobile. This comes as the US submitted a formal extradition request to Canada for Huawei’s CFO Meng Wanzhou, the daughter of the company’s founder, who was arrested in Vancouver on 1st December. Investors are concerned that this will complicate the US-China trade talks which are set to begin this Wednesday in Washington.

Gold chart

Gold has broken out of a trading range which saw it stuck between $1,285 (the 61.8% Fibonacci Retracement of the April-August sell-off) and $1,295. The break above $1,300 is psychologically significant, but the big test now is if gold can push and hold above $1,306 over the coming weeks. If so, then a retest of the April 2018 highs can’t be ruled out.
 
 
”gold  
 
Any information, analysis, opinion, commentary or research-based material on this page is for information purposes only and is not, in any circumstances, intended to be an offer of, or solicitation for, a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. Any person acting on it does so entirely at their own risk and GKFX accepts no responsibility for any adverse trading decisions. You should seek independent advice if you do not understand the associated risks.
 

Share

Author's Other Opinion & Analysis

Show More Daily Reports

Related Daily Reports

Lorem ipsum dolor sit amet, consectetur adipiscing elit. In.

Sentiment

Open a Demo Account Open A Live Account

Losses can exceed deposits

RISK WARNING

The information provided herein is for general informational and educational purposes only. It is not intended and should not be construed to constitute advice.

If such information is acted upon by you then this should be solely at your discretion and GKFX will not be held accountable in any way.

  • ForexF
  • IndicesI
  • CommoditiesC
        Back

        Login to Market Insight Account

        Your Market Insight account gives you access to the tools that we offer our customers including our
        Technical Studies & Sentiment for your accounts.

        Forgot Password?

        Don't you have a Market Insight account? With a few easy steps you can easily register to Market Insight

        Create a Market Insight's Account

        Your Market Insight account gives you access to the tools that we offer our customers including our Technical Studies & Sentiment for your accounts.

        register_ty

        Thank you!

        Welcome to Market Insight family!

        You have succesfully completed the registration.
        We will send you an e-mail to give you some
        instructions and our Terms and Conditions!
        Our account representatives will be contacting you as
        soon as possible. If you have any further questions
        please do not hesitate to mail us via info@marketinsight.com