Gold soars as US-China trade tensions rattle markets

THE US Federal Reserve lowered borrowing costs by a quarter point to the target range of 2 to 2.25 per cent.

Fed Chairman Jerome Powell, though indicating a dovish pivot, has refused to commit on aggressive monetary policy easing for 2H 2019.

A sudden escalation in the Sino-US trade dispute roiled financial markets, as the White House announced 10 per cent tariffs on US$300 billion worth of Chinese goods (with effect from Sept 1).

The US tariffs will target electronics and consumer technology imports from China.

Diminishing global risk appetites and heightened geopolitical tensions will remain supportive towards safe haven assets for the current term.

What should investors look out for in the longer term?

Subdued global economic momentum, along with an escalation in the Sino-US trade dispute, have raised downside risks significantly for the global economy. The US central bank, though disappointing financial markets with little indication of future rate cuts, will face intense pressure to further reduce borrowing costs in lieu of looming US trade tariffs. The greenback, though appreciating sharply from shifting market expectations and a series of short-covers, will continue to face headwinds amid muted inflation levels and accommodative US monetary policy. Growing trade uncertainties and lacklustre global growth will boost safe haven flows invariably in 2H 2019.

Technical Analysis for Spot Gold (XAUUSD)

Gold prices rallied upwards sharply after a brief test on the key psychological level of US$1,400.00. A strong positive momentum drove price action higher as market bulls made a renewed attempt on a key resistance zone of US$1,452.00.

A successful breach on previous highs of US$1,452.00 will see gold bulls take aim on the next main station of US$1,483.00 and US$1,500.00 (Key Psychological Level) in the near term.

Weekly Market Assessment: Bullish Key Resistance Level (1): US$1,452.00 Key Resistance Level (2): US$1,483.00 Key Support Level (1): US$1,416.00 Key Support Level (2): US$1,400.00