Top Story

Gold echoes cagey market sentiment

The price of gold fell yesterday as risk sentiment improved following sharp falls in the equity markets the day before. The dollar bounced back thanks to better-than-expected readings in the Philly Fed Manufacturing Index and weekly US unemployment claims while a mini flash crash in the GBP/USD pair also helped to underpin the Dollar Index, which in turn increased the pressure on gold. Today however, the dollar is once again weaker while equities were slightly stronger in Europe at the time of this writing. Consequently gold was a little firmer.

The key question now is what will happen in the equity markets and the US dollar. If stocks and the dollar both manage to show relative strength again, then this should pressurise the buck-denominated and perceived safe-haven gold. Conversely, gold will remain in demand should risk sentiment stays cagey. There are no obvious triggers that could change sentiment one way or the other today. But given that there hasn’t been any significant follow-through in selling of riskier assets, gold may stall here and head lower again.

Echoing this uncertainty, the price of gold is currently stuck between key support and resistance levels. Specifically, support is being provided by the 50- and 200-day moving averages at around the $1245-8 area, while resistance is being offered by old support and 61.8% Fibonacci retracement level at $1265.

If support at around $1245 breaks decisively then the next bearish objective would be $1237, which was previously resistance. Thereafter, the bullish trend line would come into focus.

Meanwhile if resistance at around $1265 area breaks then $1270 would be the immediate bullish objective ahead of the long-term bearish trend line around $1275/8 area.

As we are not too sure of the trend, we prefer at this stage to take things from one level to the next and reassess. Confirming the mixed technical signals, the 50-day moving average has moved above the 200-day average in a development known as a golden crossover, but this has happened ahead of resistance and the long-term bearish trend line. I guess the trend will become clearer in due course. So gold should be one key market to watch for any subtle changes in direction. 

Source: eSignal and FOREX.com

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.