gold-market-outlook-technical-fundamental-analysis

Gold upsurge looks to be reaching its peak, but the road to higher levels is open due to significant developments in economic fundamentals, especially with news from the biggest economies worldwide.

The US Sino trade war issue could be in its last chapters, as some positive comments made by US officials have stated that a solution could be reached.

We must note that the market has been stumbling on uncertainties from the specific matter for approximately a year.

Gold prices during this period had been thrown to very low levels, compared to highs reached previously at the start of 2018.

Currently, various analysts rushed to provide a widely debated opinion, in our opinion.

It is said, that now that the US Sino matter is falling in place, things could shake up for Gold’s prices forcing the precious metal to move downwards as the risk seems to be reduced with the recent developments.

A very obvious understanding of the matter, allows a number of market participants to believe that, with a collaboration between the US and China improving the global trade sector, it opens the way for Europe to make a deal also and relieve business worries and risk internationally.

However, as market followers and especially precious metal observers we would like to state that, the most obvious understanding of the market, does not lead to the most obvious price direction for Gold prices also.

We stick to our opinion stated in previous reports that, as we get closer to a deal on the US Sino front, risk appetite could be lifted, hence the USD weakened, which in our opinion implies that Gold prices could now head higher surpassing 1300 USD per ounce.

Should risk be lifted, it could allow the Shiny metal to be appreciated more, in contrast to being oversold as risk mounted, the USD was supported and the emotional side of the traders prevailed.

Furthermore, significant news on physical Gold reserves has been noted, regarding the Chinese Mainland.

China gold reserves increased to 59.560 million fine troy ounces accounting for only until the end of December.

The fact comes as a surprise as Chinese Gold reserves were held constant for more than 2 years since October 2016.

More specifically, the Mainland until September 2018 has imported 1.065,2 tonnes of Gold from 5 different countries which account for an increase of over 25% compared to the same period in 2017.

Very impressive is the amount of Gold imported from the UK which peaked at 143 tonnes compared to 10.7 in 2017 and from Switzerland imported 423.5 tonnes until November compared to 132.2 tonnes in 2017.

Countries undergoing excessive bullion purchasing usually have an important reason and do it very strategically.

Please be advised that China had announced during mid-December in its forecasting, that they tend to use the quality of the precious metal as a safe haven.

The Chinese Government stated that they are expecting an economic slowdown in 2019, so they could be taking this opportunity to prepare against harsher times.

On other news, SPDR Gold Trust GLD, the world’s leading gold-backed exchange-traded fund indicated, holdings are still at the highest levels since August 2018, supporting demand for the shiny metal.

In general, for the year ended 2018, Gold-backed exchange-traded funds appreciated in value globally as uncertainty about Britain’s exit from the EU drove investors to the perceived safety of European-backed ETFs.

Bullion prices hit their highest since June 2018 at $1,298.42 on Friday when uncertainty intensified on various comments made by Chairman Jerome Powell.

The chairman stated specifically for the market should be patient on the FED’s next moves indirectly setting doubts on any future plans the FED has.

FED president Powell also mentioned that the Fed is not on a pre-set path of rate hikes and implied that it could pause its monetary policy tightening.

Gold correlation to interest rates is most of the time negative, hence with these comments, the outcome could be positive for the precious metal.

Bullion reached a six-month high nearing $1,300 an ounce, as the above-mentioned news lured the market, and as a conclusion, we support the opinion that it could move higher gradually as the comeback has been taking place for some months now.

XAU/USD 1 Hour chart

Support: 1280.60 (S1), 1270.70 (S2), 1261.00 (S3)
Resistance: 1290.40 (R1), 1298.20 (R2), 1308.20 (R3)

Over the past few sessions, gold’s prices seems to be contained in a sideways movement between the 1280.60 (S1) support line and the 1290.40 (R1) resistance line.

We could see the bullion trading with bullish tendencies in the coming week, especially should the USD’s bearish tendencies continue over the coming days.

Should the bulls dictate gold’s direction, we could see its prices breaking the 1290.40 (R1) resistance line and aim for the 1298.20 (R2) resistance level.

On the other hand, should the bears take over the bullion could finally break the 1280.60 (S1) support line and aim if not break the 1270.70 (S2) support level.