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Gold whipsaws over robust US economic data

A weekly market summary for gold, Apr 8-12

GOLD prices exhibited topsy-turvy trading conditions amid shifting market expectations on bullion appeal this week. Risk appetites diminished early week as the IMF slashed global growth forecasts downwards for the third consecutive time in six months.

The impact of trade protectionism and its disruptive effect on the global supply chain unnerved traders' amid heightened downside risks for 2019. Market sentiments shifted rapidly however over stronger-than-expected US economic releases. A rebound in the US dollar and US 10-year yield cumulated to a sharp retreat in gold prices as investors pivoted away from the non-interest bearing asset. Though strong risk appetites have capped bullish gains in Q2, mounting economic and geopolitical uncertainties will keep gold prices vigorous in the longer term.

What should investors look out for in the coming term?

The lagged effects of monetary policy tightening and weaker economic growth will soften risk appetites invariably in 2019. The rise of populism in global politics has raised market risks as investors grapple with Brexit uncertainties and US trade protectionist policies.

Market voices on:

Though gold prices have struggled to retain positive gains over robust risk appetites, we opine that subdued global economic momentum will lay fundamental support levels for bullion appeal. Safe haven assets will remain vigorous as investors tread carefully over the commencement of US corporate earnings season (Q1 2019) in the coming term.

Technical Analysis for Spot Gold (XAUUSD)

The precious metal reversed early gains as strong negative influences impede upside potential for the current term. Severe headwinds at the key resistance level of US$1,316.00 have elicited sharp bearish pressures as market forces resist further bullish gains. Failure to hold above US$1,302.00 has reinforced negative market expectations and technical selling activities as gold bears target the next trendline support.

Should gold prices break the crucial support zone of US$1,276.00, we can expect a bearish correction towards the next main station of US$1,265.00 and US$1,245.00 in the short term. Gold prices must press forward and hold above US$1,302.00 to support a continuation of the bullish trend scenario.

Weekly Market Assessment: Range-Bound
Key Resistance Level (1) : 1,302.00
Key Resistance Level (2) : 1,316.00
Key Support Level (1) : 1,276.00
Key Support Level (2) : 1,265.00

  • The writer is an investment analyst at Phillip Futures