Heavy Selling in Gold
Following an impressive 33% rally this year so far, gold prices are showing signs of topping out near-term. The futures market has reversed sharply from YTD highs with the weekly chart showing a large bearish reversal candle. With bearish divergence seen in momentum studies on the daily timeframe, the technical picture is suggesting room for a correction lower. But what’s driving the move on the macro side?
Risk Sentiment Rebounds
There has been a broad shift in investor sentiment this week as a result of a softer tone from Trump on China. Trump signalled earlier in the week that tariffs on China would likely soon come down, expressing optimism that the two sides could work together to achieve a trade deal. This was followed later in the week by news that China is reportedly considering a tariff exemption on some US goods. Together, these developments have been received as hugely encouraging that we might soon see an end to the trade war between the two. While both sides have confirmed that no such talks have yet begun, the market is clearly optimistic.
Bearish Gold Risks
The implication for gold, however, is that prices are falling on reduced safe-haven demand. The trade standoff between the two superpowers has been a major source of demand for gold this year. If traders now get the sense that the trade war is coming to an end, gold has room to fall heavily as traders move capital back into more traditionally high-yielding assets. As such, gold prices remain highly vulnerable near term to any positive headlines on the US/China trade front with the market likely to move sharply lower if/when we see any tariff reductions announced from either side.
Technical Views
Gold
For now, gold prices are holding above the broken bull channel highs and the 3,254.65 level. While this area holds as support, focus is on a fresh push higher and continuation of the bull trend. However, if we break below this level, 3,164.82 will be next support to watch ahead of deeper support at the channel lows and 3,053.76 level.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.