Moving Average: SMA 100(1197.45) & SMA 200(1194.50) strong resistance for Gold today..
Technical Trade Idea:
Most Likely Scenario: long positions above 1186.50 with targets at 1194.50 & 1202.20 in extension.
Alternative scenario: below 1186.50 look for further downside with 1182.45 & 1179.30 as targets.
Overall, The trading week kicked off with a panicked sell-off in Chinese equities which simply expresses growing fears in financial markets. Rising U.S. and global interest rates, a stronger U.S. dollar, slowing economic activity, and of course, tense U.S.-China relations have all attributed to the nervous market environment. The cut of the Reserve Ratio Requirement from PBOC to boost credit did little to help appetite, in a sign that more action needs to be taken to avoid a hard landing. While we think that China still has a lot of monetary and fiscal tools to cushion a slowdown to its economy, investors need to see the domestic picture improving before seeing a significant rally in its equity markets.
There are quite a few variables influencing the price action which leads me to believe we’re more likely to remain in a range over the near-term. One event that nobody seems to be talking about is the U.S. November elections.
Traders are saying that today’s early session strength is being fueled by safe-haven bids from risk-averse investors. The buying could be coming from Asia where stocks are under pressure again. Furthermore, renewed concerns over a potential slowdown in China’s economic growth as well as an easing U.S. Dollar could be underpinning the market.
If it’s being viewed as an investment then investors will have a difficult time generating enough upside momentum to trigger a breakout through the resistance because of the rising interest rate environment in the United States. This helps support the U.S. Dollar which leads to lower foreign demand for dollar-denominated gold.
If gold starts to take on the identity of a safe-haven asset then demand will have to increase enough to drive out the net short hedge and commodity funds. Only then can we see a bona fide breakout to the upside.
There are quite a few variables influencing the price action which leads me to believe we’re more likely to remain in a range over the near-term. One event that nobody seems to be talking about is the U.S. November elections.