Precious GOLD-en signs for bears

The correction potential is still there – barring an unexpected U-turn in risk appetite and/or a big sell-off for the dollar in response to today’s US jobs report.

Earlier this week, we highlighted the possibility for a correction in gold as the metal traded around the key $1550 hurdle. Much of what we said on Monday remains relevant today: the revival of hopes for a trade deal between the US and China, as well as reduced risks of a no-deal Brexit have helped to reduce demand for haven assets. But gold investors ignored these factors and the metal briefly broke above last week’s high by mid-week and the rise in risk appetite was evidenced instead by an upsurge in equity prices and commodity dollars. However, gold could not hang on to those gains and a sharp sell-off followed yesterday which saw the metal turn negative for the week. So, the correction potential is still there – barring an unexpected U-turn in risk appetite and/or a big sell-off for the dollar in response to today’s US jobs report.

In fact, after a 4-month rally, the precious metal looks technically overbought anyway and so a correction of some sort could be due. Assuming (and that’s a big assumption by the way, given the upcoming NFP report) gold does not stage a sharp recovery here, it will have created its second consecutive bearish weekly candle around major long-term resistance circa $1555. The metal was probing short term support around $1505 at the time of writing. If this level gives way meaningfully then the next key support comes in all the way down around $1450 on the weekly time frame.

Source: Trading View and City Index

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.