gold retreats on stronger dollar stable equities 1025152015
<p>The price of gold dropped on Thursday after hitting a three-week high around 1126. This retreat follows three consecutive days of substantial gains this week […]</p>
Share this:
The price of gold dropped on Thursday after hitting a three-week high around 1126. This retreat follows three consecutive days of substantial gains this week as gold shorts covered and China’s currency devaluation prompted turmoil in the currency and equity markets.
Thursday’s gold retreat gave back some of those gains made in previous days as the dollar regained some momentum and major global equity markets, most notably in the US and China, showed increasing stability after a volatile first half of the week.
The rebound that began at the start of this week broke out above a prolonged consolidation pattern just above late July’s new 5-year intraday low of 1077. This upside break invalidated the bearish pennant pattern that, if it had been broken to the downside, would likely have served as a downtrend continuation towards lower lows.
Instead, the relief rally of the past several days has reinforced the key support zone around 1080-1085, suggesting that a tentative bottom may have been formed. Current fundamentals, however, suggest that gold may have significantly more to fall before establishing any truly sustainable bottom.
Most notably, the US dollar should continue to see gains in the coming months as the Fed enters into an impending cycle of tightening monetary policy, with the first rate hike expected to begin by the end of this year. Any continued strengthening of the US dollar will place continued pressure on the price of gold, potentially constraining any substantial recovery.
While a push higher in the price of gold may be possible in the near-term, major upside resistance resides around the 1142 level, which was prior support before its breakdown in mid-July.
To the downside, the noted 1080-1085 support zone continues to be the price area to watch. Any sustained breakdown below that could send the price of gold tumbling down to the next major support levels at 1045 and then 1000, which is both an important psychological level as well as the 261.8% Fibonacci extension of the latest rebound from this past March to May.
Related tags:
Open an account in minutes
Experience award-winning platforms with fast and secure execution, and enjoy tight spreads from 0.5 pts on FX and 0.3 pts on indices.
Economic calendar
Web Trader platform
Our sophisticated web-based platform is packed with features.
Related articles
This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.
StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.
In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.
StoneX Financial Pte. Ltd. is not under any obligation to update this report.
Trading CFDs carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.forex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.