Looking around, through various news articles and televised financial programs all we see is risk.
Risk could be derived from national debt, unreliable financial instruments such as junk bonds, but also through countries with major activities and the relationships with other nations.
Risk can also be defined as military exposure, collapse of financial systems and crisis emerging from uncontrolled businesses or industries.
Gold, as a precious metal, has been used throughout history considerably for 5000 years, as the solution for all the above and many other issues, and has been a very strong shield for investors, kings, merchandisers, and thieves.
In the latest centuries, it has been mostly used to cover for some external situation happening rather than for its shiny appearance or weight.
Last week, bullion posted its largest weekly decline since August after the Fed maintained its hawkish stance indirectly stating it will follow up with its rate hike path, which is negative for the shiny metal.
Continuing this week, Gold dropped even lower to reach its bottom level in a month on Monday as the dollar persisted its strengthening , as an aftermath of the midterm elections and the pre mentioned FED meeting.
The U.S. dollar index, a measure of the value of the U.S. dollar compared to a group of currencies belonging to the U.S.’s most significant trading partners was just below a 16-month high of 97.69 hit on Monday.
Indicating more money was moved in the US Dollar and retrieved from traditional safe haven instruments.
Analysts and market participants stated, the Shiny metal could persist its current drop in the next days as financial releases and a positive sentiment could favor the USD further.
In our opinion, the huge drop in Bullion prices enacted since last week, could be the way to even higher grounds.
The shiny metal loves to make large swings down as well as up, and in previous drops we have seen Gold make a comeback much stronger than anticipated.
Bullion could also be moving in minor cycles during the past weeks until today.
If the precious metal is really in a comeback mode and is ready to move higher, the market may have to get used to it advancing and then taking all the gains back.
Fundamentally, in our opinion, Gold could be extremely sensitive to the US Sino trade wars.
If the two countries maintain their positions and stance towards each other, with retaliation in constant play, we could see the US dollar strengthening even more due to the US displaying its dominance as the strong part of the two countries.
On the other hand, if the US and China are willing to put their differences aside and reach a deal which will favor both sides but lean towards the US side, we could see Gold prices picking up as risk is significantly being reduced.
This is our opinion, based on the reaction we saw on Gold prices when the news was out that the two countries will be meeting again in November.
Gold is an instrument Investors turn to when risk is in play, but market participants should not be closed minded to this statement.
Nor should investors be tied to the fact that Bullion prices follow the opposite direction of the US dollar.
This could be the case 60% of the time though the market could never be locked in rules neither price movements in special directions or reactions.
The shiny metal despite its decrease in price, remains in the center of interest and does miracles for traders that are willing to remain in the market, during hard times.
Gold is a go hard or go home instrument.
As a conclusion, for the long term we could see bulls eventually kicking in quite strongly, but as long as the US has rate hikes pending we may see down swings and corrections taking place.
Gold has been in a bearish movement for almost one week tumbling from 1235 all the way below 1200 at the moment.
Breaking below the 1200 psychological threshold, the next price could be the (S1) 1194.57 support level.
If that level is breached the next stop for the precious metal could be the (S2) 1189.04 and then the (S3) 1183.70 support barrier.
If Bullion is in for a bullish run then after breaking above the (R1) 1,200 resistance level, the metal could aim for the (R2) 1210.66 resistance barrier.
We note, all of our resistance levels including (R3) 1218.64 resistance line have been breached upwardly in a single session on the 11th of October and so it could happen again.