What comes next for gold?

After spending the better part of eight weeks trading sideways, gold finally made its move. In this article, we provide a recap of some of the factors that conspired to send the precious metal lower and what comes next for gold.

Behind golds move to $1445;

  • The Federal Reserve signalling an end to its easing cycle after 75bp of cuts.
  • Money flowing out of safe-haven assets such as gold, following an apparent reduction in geopolitical risks including Brexit and the U.S.- China trade war.
  • A run of better than expected economic data including U.S. GDP and jobs data that signalled a potential upturn in economic activity.

The subsequent modest recovery in gold prompted by an escalation in violence in Hong Kong as well as a review of the factors above, perhaps the most significant of which is news that the U.S. - China trade deal has reached a stalemate.

CNBC have reported that due to President Trump's reluctance to roll back tariffs, China will hold off from signing the trade deal until after the U.S. election. In the meantime, it will provide the Chinese economy with economic support, evidence of which is the PBOC cutting the 7-day repo rate yesterday and a cut to the Medium Lending Facility rate two weeks prior.

Casting a shadow over the assertion that U.S. economic activity turned higher, lower than expected U.S. inflation, retail sales and industrial production numbers last week. The U.S. interest rate market is once again fully priced for a 25bp cut over the next 12 months.

In line with our article two weeks ago, gold has thus far held the wave equality support $1440/30 area. The formation of bullish Doji candle at the $1445 low was a positive development and a trigger to consider entering longs as outlined here;

Providing a bullish reversal candle then forms in the $1440/1430 support area it would be the setup to re-enter gold longs in anticipation of a move above $1600 for Wave V.”

A daily close above the $1475/85 resistance zone is needed to further support the idea that a low is in place at $1445 and that the uptrend has resumed.

What comes next for gold?

Source Tradingview. The figures stated areas of the 19th of November 2019. Past performance is not a reliable indicator of future performance.  This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

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.