Gold, ASX 200 analysis: Asian Open – 10/10/2023

Market Summary:

• Bond investors finally found a reason to support bond prices on Monday, as the Middle East conflict saw bonds attract safe-haven flows and send yields lower
• Whilst the official markets were closed due to Columbus Day in the US, futures markets imply that that yields will open around -15bp lower from the 2-year, 10-year and 30-year bond yields
• The US dollar index fell for a fourth consecutive day, although only marginally. Still, it allowed AUD/USD to rise for a fourth day and close above 64c,
• Gold and oil held on to earlier gains achieved when they gapped higher at the weekly open, due to the Middle East conflict between Israel and Hamas.
• A Senior Hamas official said the group is open to the possibility of a truce with Israel
• However, Jefferson noted that the aggressive rise in bond yields means the Fed may need to “proceed carefully” with any future hikes
• The odds of a 25bp Fed hike in November fell from 27.1% to 11.4% following the comments
• The Conference Board Employment Leading Index (ELI) for the US rose to a 2-month high to signal “continued job growth ahead”, with their senior economist adding “the US economy will continue adding jobs through the remainder of 2023 and into next year, even if the rate of growth slows”. Whilst their separate outlook favours a recession in early 2024, they expect it to be short lived
• Wall Street looked past the negative sentiment from the Middle East conflict with the S&P 500 leading the way and rose 0.63% to a 10-day high

 

 

Events in focus (AEDT):

• 10:30 – Australian consumer sentiment (Westpac)
• 10:50 – Japan’s current account
• 11:30 – Australian building approvals, business confidence (NAB)

 

 

ASX 200 at a glance:

• The ASX 200 rose for a third day on Monday, and the cash market is set for a positive open today with Wall Street indices and SPI 200 futures all rising
• Energy stocks were the clear winner on the day, with the sector rising 3% to support the broader market, despite 6 sectors declining
• But with oil prices holding steady, can we expect a strong bullish follow-through today? Perhaps not. Especially with 7,000 resistance nearby
• The ASX tapped 7,000 yesterday which marked the high of the day, and it remains an important level today and perhaps this week
• Given the daily trend remain bearish, I’d feel inclined to seek evidence of an intraday swing high below or around 7,000 whilst keeping an eye on sentiment across other APAC stock indices

 

Gold technical analysis (daily chart):

I outlined a case for gold to rally from its cycle lows last week, and it’s played out well having reached the initial 1850 resistance zone. Whether it can extend gains from here is likely down to whether the Middle East conflict escalates beyond Israel and Hamas (which could send gold higher), or there’s a resolution. Under the latter scenario, we might find that bonds lose their bid, yields go higher and gold buckles on the strain one more. For now, I see the potential for some further upside towards 1880.

 

Gold technical analysis (1-hour chart):

Prices made a modest attempt to break higher in the US session, and with the 100-bar EMA and weekly R2 pivot point around 1870 is makes a likely resistance area should gold remain bid today in Asia. A pullback towards 1850 would be welcomed for potential longs, with the next upper target being around 1880 / August low / monthly pivot point.

 

Further out, gold could struggle if yields being to rise once more and we may find gold will try to close that gap.

 

 

 

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge