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Gold retreats over renewed global risk appetites

A weekly market summary for gold, Sept 2-6

GOLD prices pared back early gains over an improvement in global risk sentiments. A resumption in high-level trade talks between the world's two largest economies (the US and China), along with softer geopolitical overtones (Hong Kong, Brexit), eased risk-off sentiments for the current term.

Better-than-expected Caixin PMIs (China) and strong US labour markets spurred risk assets forward while imposing considerable headwinds on the precious metal. Heightened US-China trade optimism and buoyant market sentiments will impose considerable headwinds on the non-interest bearing asset amid profit-booking activities by money managers.

What should investors look out for in the longer term?

The next FOMC meeting (Sept 18) will be of key focus as market expectations build for an additional quarter-point cut in US interest rates. Financial traders have maintained bets for a reduction in US borrowing costs amid subdued US inflation levels and lacklustre manufacturing activities. Safe haven assets, though easing up on bullish gains from softer geopolitical overtones, will remain supported over rising economic uncertainties (2H 2019). Accommodative monetary policy along with looming global recessionary concerns will keep investors vested within safe haven assets for the current term.

Technical Analysis for Spot Gold (XAUUSD)

The precious metal pulled back from freshly minted 2019-highs (US$1,555.00) as gold bulls struggled with an extension of the bullish wave. Strong negative bias was triggered as spot gold failed to hold above the key technical level of US$1,535.00. Gold prices must break above US$1,535.00 for a continuation of the bullish trend scenario towards the next main station of US$1,555.00 (previous highs). Failure to hold above the key support level of US$1,516.00 will promulgate bearish bias towards the key trend line support of US$1,500.00 (Key Psychological Level) and US$1,492.00 for the near term.

Weekly Market Assessment: Range-Bound
Key Resistance Level (1): US$1,555.00
Key Resistance Level (2): US$1,535.00
Key Support Level (1): US$1,492.00
Key Support Level (2): US$1,480.00

  • The writer is an investment analyst at Phillip Futures