Gold price fell on Tuesday, hovering near a more than two-week low touched in the previous session, as the US dollar strengthened, while the improved risk appetite took the sheen off bullion ahead of the release of minutes from the US Federal Reserve’s latest policy meeting.
The price of spot gold eased by 0.1% to 1,276.01 USD per ounce by 06:10 a.m. ET, having slipped as low as 1,273.22 USD on Monday. The US gold futures were also down by 0.1% at 1,275.50 USD per ounce.
Gold, which is generally considered a safe-haven asset, has shrugged most news of escalating tensions, much to the bulls’ dismay. Gold’s lack of momentum despite escalating trade war raised concerns about stability in the Middle East, recent stock market gyrations and bond yields near an 18-month low have left potential investors frustrated and sidelined. Right now the only safe-haven out there seems to be the US dollar, which has been moving higher against most currencies. The currency is stable, close to its 2.5-week high, backed by higher US bond yields.
The price of gold is one of the most interesting topics on the world markets amid the dynamic events surrounding the trade wars, the political turmoil in one or another country and a number of factors that do not appear to be the basis of the price movement of the precious metal.
The US dollar is particularly strong against almost all currencies, especially in emerging markets. This means that the market is likely to have a dollar shortage for one reason or another. Two-year and ten-year bonds are below the Fed’s upper limit.
if the environment is deflationary to the US dollar, the gold itself should fall. In this case, all developing economies use gold as collateral. At a certain point, gold is their last asset with which they can get dollars.
According to the analysts, the short-term movement in the price of gold is determined by popular factors such as trade wars, stock market movements, the purchasing power of central banks and a number of others.
From a technical point of view, a first positive signal for gold would be a recovery to 1,290 USD, while a fall below the recent low of 1,266 USD could open space for a further decline.
Among other precious metals, silver was down 0.3% at 14.42 USD per ounce, closing in on the more than five-month low of 14.33 USD touched in the previous session.
The price of platinum rose by 0.5% to 815.64 USD per ounce, while palladium firmed by 0.4% to 1,333.60 USD per ounce.
Gold price analysis
Gold finally broke down of its consolidative trading range – forming a bearish continuation rectangle chart pattern and tumbled to fresh two-week lows. A sustained break through the pattern support near the 1,274 USD horizontal area was seen as a key trigger behind the latest leg of a sudden drop in the last hour.
According to the analysis of Commerzbank, the gold has once again sold off its 9-month uptrend line at 1,273 USD, and this is starting to look exposed.
“Failure here will allow for slippage to the 200-day SMA and October high at 1258.92/1243.55 and this will need to hold to retain our bullish outlook. Should it hold here than gold will remain well placed to challenge the resistance at 1,324.76/1,326.51, the January and March highs”, said Karen Jones, an analyst at Commerzbank. “Only a close below the 1,243.55 USD October high would call into question our bullish bias by neutralizing the chart and suggesting further weakness to 1,231.20 USD, the 61.8% retracement and 1,200 USD, the 78.6% retracement. Above 1,326.51 USD would allow for a retest of the February high at 1,347.11 USD. Directly above here lies the 1,358.70 USD major resistance. This is extremely tough resistance for the market and we would allow for this major zone to again hold”, added the analysts.
The occurrence of death-cross on hourly charts – wherein 50-period SMA crosses below 200-period SMA, add credence to the bearish set-up. However, technical indicators on the 4-hourly chart remained in the oversold territory and might turn out to be the only factors holding traders from placing aggressive bearish bets.
Meanwhile, oscillators on the daily chart maintained their bearish bias and are still far from being in the oversold zone, clearly suggesting that any attempted bounce might still be seen as a selling opportunity near the 1,278-1,279 USD region for an eventual slide back towards monthly swing lows support near the 1,266 USD region.