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Gold prices rose slightly on Thursday

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Gold prices rose slightly on Thursday as the US dollar trading close to a one-week low hit in the previous session, while investors awaited progress on the Sino-American trade negotiations.

Spot gold had risen 0.1% to 1,291.37 USD per ounce, while the US gold futures were unchanged at 1,295.70 USD per ounce.

The German industrial data is the main market driver this morning, while the falling equities are giving some support on the gold price. The bearish moods on equity markets increase the investors’ appetite for bullion. German industrial orders fell at their sharpest rate in more than two years in February, compounding worries that Europe’s largest economy had a weak start to the year. The country’s leading economic institutes also slashed their 2019 growth forecasts and warned that the numbers could be much lower still if there is a no-deal Brexit.

Meanwhile, the China-US trade negotiations are another important topic in the markets. Any positive development will be negative for the dollar, which has been the preferred safe-haven during the year-long tariff dispute between the world’s top two economies.

Holdings in the world’s largest gold-backed exchange-traded fund (ETF), SPDR Gold Trust, fell for a third straight session on Wednesday. Holdings were at their lowest level since December 17 at 24.57 million ounces.

Among other precious metals, spot platinum was last up 1.4% at 886.79 USD per ounce. The auto-catalyst metal jumped 3.4 percent in the previous session, the most in more than two years.

Palladium was up by 0.4% at 1,410.15 USD per ounce, while the silver was down by 0.4% at 15.07 USD per ounce.

The impact of monetary policy on gold

The World Gold Council has recently published the new Investment Update about the effects of monetary policy on gold. The main finding is that, historically speaking, when the US monetary policy turns from being tight into a neutral stance, the price of the precious metal increases, although this effect is not always immediate. Indeed, the gold’s reaction to the March Fed’s U-turn was initially rather muted.

There might be a few possible explanations:
– a weakening of inflationary pressure;
– uncertainty about interest rates hikes;
– a shift in investor allocation to safe fixed income from riskier assets;
– an uncertain dollar trajectory (lower interest rates versus safe-haven demand)

More dovish Fed may often support the risky assets, actually.

The stock market was one of the greatest beneficiaries of the easy monetary and financial conditions in general and quantitative easing in particular.

The WGC’s analysis indicates that gold does perform better in a post-tightening cycle, but the period over which this occurs varies. For example, the gold rose by 3.6% in 2001 (12 months after the Fed stopped raising interest rates). But it rose 7% only one month after the transition in 2007, a trend that continued as it was 19% higher 12 months after the Fed’s last hike.

Gold price analysis

During trading yesterday, gold dropped from 1,291.91 USD to 1,289.31 USD per ounce.

This morning it traded at 1,291.37 USD.

Gold futures

If today the gold overcomes the resistance range of 1,292.39-1,293.07 USD per ounce, it will target reaching and testing the zone of 1,296.49-1,296.82 USD per ounce. Upon success, the upward movement will continue to 1,298.55-1,299.23 USD per ounce.

If the gold falls below the support area of 1,286.91-1,286.23 USD per ounce, the next support will be the area of 1,284.5-1,284.17 USD per ounce. In case of a breakthrough, the downward trend will continue to 1,280.75-1,280.07 USD per ounce.

Silver price analysis

During trading yesterday, silver rose from 15.08 USD to 15.11 USD per ounce.

This morning it traded at levels 15.07 USD.

silver futures

Today, if the silver overcomes the resistance range of 15.18-15.19 USD per ounce, it will target testing the zone of 15.26-15.26 USD per ounce. Upon success, the upward trend will continue to 15.34-15.35 USD per ounce.

If the silver falls below the support area of 15.03-15.02 USD per ounce, the next support will be the zone 14.94-14.94 USD per ounce. In a breakthrough, the downward trend will continue to 14.87-14.86 USD per ounce.