Gold prices rallied to their five-week highs in late-morning trading Thursday, but futures are trading nearly flat after giving back earlier gains. The Investors are being influenced by the price action in the US Dollar Index while ignoring another steep drop in US Treasury yields and a plunge in stock indexes. The price action is actually a little confusing which suggests safe-haven buying is underpinning the U.S. Dollar, which is making gold a less-desirable asset.
The US stock indexes opened with sharp losses against the bearish sentiment, which settled in Europe and Asia following the arrest of the daughter of Huawei’s founder Ren Zhengfei in Canada. This has prompted some safe-haven demand for the gold market.
The spot gold prices are holding near 1,241.35 USD per ounce, having reached 1,244.32 USD per ounce, its highest since July 17, just under critical resistance at 1,250 USD per ounce. The precious metal is holding on to recent gains, showing little reaction to the latest economic data, which shows that the sentiment in the US service sector continues to increase. The market is reacting to strong fear moods throughout financial markets as US equity markets remain down nearly 2% across the board.
The dollar fell about 0.5% as the US Treasury yields tumbled and traders scaled back expectations on the number of hikes the Fed would implement amid weakening economic data and market volatility. The weaker dollar is keeping gold positive at the moment. Looking at the other markets as well, there is a kind of risk-off situation going on.
Gold price technical analysis
The gold price rose sharply at the beginning of the session as the precious metal gathered strength against its rivals amid stronger demand for safer assets. After touching its highest level since mid-July at 1,244.40 USD, the precious metal staged a technical correction and was last seen trading at 1,241 USD, where it was up 0.33% on a daily basis.
The initial resistance for the pair aligns at 1,243 USD (200-DMA) ahead of 1,248 USD (July 12 high) and 1,260 USD (July 10 high). On the downside, supports could be seen at 1,233 (December 5 low), 1,226 (November 5 low) and 1,222 USD (50-DMA).
A trade through 1,247.50 USD will indicate the return of buyers. If this move creates enough upside momentum then look for the rally to continue into 1,252.00 USD. Taking out this top with conviction will be bullish since the daily chart indicates there is room to run with 1,284.10 USD the next major upside target.
With the latest developments surrounding the Chinese tech-giant Huawei’s CFO’s arrest in Canada, concerns over the US and China failing to reach a trade agreement at the end of the 90-day truce period escalated and forced global equity indexes to suffer heavy losses.
Palladium price analysis
The analysts had predicted for a long time that palladium will become more expensive than gold. Yesterday the palladium is traded at a level of 1,243 USD per ounce.
Generally, palladium is used in the automobile sector, and more precisely in gasoline catalysts, where it is applied to filter out the harmful emissions. Since early August, the price of palladium has increased by more than 25%, and for the year – over 10%.
Meanwhile, the gold has fallen by nearly 6% this year.
Palladium received strong support this weekend due to signals that the US and China had reached ceasefire in their trade war. The analysts consider that a trade deal between the tw countries may stabilize the demand in the automotive sector and increase the price ot the palladium.
Of course, there are also sceptical moods about the price of palladium. Experts recall that with such a high price difference between platinum and palladium, it is quite possible that platinum will change palladium in gasoline engines, as the both metals are relatively replacable.