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Gold firms as markets deliberate growing risks in global economy

A weekly market summary for gold, Jan 19 to 25

What are the key drivers for gold this week?

The International Monetary Fund (IMF) has revised global growth forecast to 3.5 per cent in 2019 and 3.6 per cent in 2020. Growing market risks have been cited in lieu of a protected US-China trade dispute, weaker investor confidence in the global markets and faltering Chinese economic data. US equity markets eased off bullish gains from a four-consecutive week bullish streak amid adverse growth prospects and looming economic uncertainties. The effects of subdued economic momentum has supported bullion appeal in the current term as investors remain cautious on riskier assets. Gold has demonstrated strong support despite competing influences from interest-yielding assets and a stable US dollar since Jan 19.

What should investors look out for next week?

Slower economic prospects and heightened geopolitical risks have cast a shadow upon risk-on investment appetites. Safe haven appeal continues to show positive trading conditions as investors deliberate the impact of a decelerating Chinese economy and trade protectionist policies on the global supply chain. Market pessimism and softer economic conditions have raised the potential of looser monetary policy from the US Federal Reserve in 2019, with gold standing to gain from potential greenback weakness should that come to pass. Though gold looks poised to benefit from safe haven demand in 2019, price action has suggested sideways trading amid upside pressure from interest-yielding assets. We continue to assess for strong support on gold prices as investors are cautious over rising market uncertainties and divisive conduct in global politics for 2019.

Technical analysis for spot gold (XAUUSD)

Strong support has been sighted at the crucial support zone of 1,278.00. The appearance of doji candlestick patterns and sharp pullbacks on several occasions have signalled marked resistance towards bearish attempts in the current term. Sideways trading activities remains a key feature as key resistance level of 1,298 demonstrates for marked resilience. Gold prices have shown a holding pattern as traders remain irresolute on trajectory in the current term. Though we continue to assess for bullish overtones in the longer term, we remain cautious on a potential short-term bearish correction in Q1 2019.

Weekly Market Assessment: Range-Bound
Key Resistance Level (1): 1308.00
Key Resistance Level (2): 1298.00
Key Support Level (1): 1278.00
Key Support Level (1): 1265.00

  • The writer is an investment analyst at Phillip Futures