Gold maintains bullish edge on global growth worries
A weekly market summary for gold, July 1-5
GROWING signs of weakness in the global economy along with US protectionist trade policies have raised bullion's appeal substantially for the current term. China's Caixin Purchasing Manufacturers' Index (June 19) continues to illustrate lacklustre figures as global demand stays subdued over rising economic uncertainties.
A prolonged Sino-US trade dispute has imposed considerable headwinds on global growth amid disruptive effects on the global supply chain. With global central banks illustrating a dovish pivot in monetary policy guidance, gold prices look poised to benefit from looming US dollar weakness for the near term.
What should investors look out for in the longer term?
The precious metal rallied by more than 10 per cent (on June 19) amid increased flights of safety from global growth concerns. Subdued economic momentum along with heightened geopolitical risks (US trade protectionism) have supported a sharp ascension in gold prices as investors stay vested within safe haven assets. Lower yields in US treasuries further strengthened bullion appeal as traders contemplate softer US dollar prospects for the coming term.
Gold's run-up, though excessive from speculative elements, has exhibited further upside potential as markets expect monetary policy easing by the US Federal Reserve in 2H 2019.
Technical Analysis for Spot Gold (XAUUSD)
Gold prices bounced amid strong support at a key technical level of US$1,382.00 (38.2 per cent Fibonacci Retracement - Month Chart). Gold bulls followed up with a renewed attempt on previous highs of US$1,439.00, though strong resistance denied a further extension of the bullish wave. Technical indicators remain supportive for a continuation of the bullish trend scenario.
Gold prices must hold above US$1,400.00 (key psychological level) to validate the bullish overview in the near term. Should gold prices establish a bullish breakout above US$1,439.00, we expect a consequent challenge on the next main station of US$1,480.00.
Weekly Market Assessment: Mildly Bullish Key Resistance Level (1): 1,440.00 Key Resistance Level (2): 1,480.00 Key Support Level (1): 1,400.00 Key Support Level (2): 1,380.00
