Looking at the week ahead, Gold has the opportunity to increase its price value and correct the trend of previous days, as in our opinion the current pricing does not correspond to various fundamental looming the market at the moment.
Yesterday in the Asian morning the expected deceleration of Chinese fundamental data, proved to hurt the European Stock markets and Gold prices.
China is the second largest economy on a global scale and has tremendous influence on other continents, commodities and precious metals.
Even though the slowdown was vastly expected we see the case for the news lifting some significant risk attitude, due to the impact on transactions China has with other countries and a slowdown of its own operations.
In any case, the weakening data confirms, the Chinese economy remains in a decline and raises worries.
Lifting the risk sentiment is what the precious metal uses as fuel to start its engine moving in various directions and sometimes uncontrollable.
Very opposing, the shiny metal was not interested or did not seem energized by the event.
Of course, the trend since last week was able to maintain its direction somewhat.
The precious metal could do some sideways trading prior to breaking the round number of 1300.
However with risk mounting up, the 1300 is just a stepping stone for higher grounds.
On other news, Brexit negotiations do create some uncertainty especially as the inner political stage in the UK is in such a mess, and with no plan at the moment to save the situation.
We doubt if the UK parliament can reach a deal with its current course, as disagreement looms over various subjects like for example the Ireland boarder or how will EU citizens be dealt with after the deal.
Yesterday, watching live PM Teresa May’s speech, confirmed parliament remains heavily divided and target less.
Let’s not forget the issue has an ending date and after that the matter worsens for the Brits, as it will cost the UK millions of GB pounds for every day the issue remains unresolved.
Gold could catch up with volatility from UK developments especially towards Brexit’s end date were fear or risk could intensify.
Economists are now making a case from a potential slowdown in the United States.
It is said that any hesitation from the FED to raise interest rates as forecasted, could indirectly mean growth in the United States is under control and modification is no longer needed.
Gold rally’s on hopes of lower interest rates, as they decrease the opportunity cost of holding non-yielding bullion.
Furthermore, on Monday, the International Monetary Fund downgraded its world economic growth estimates for 2019 and 2020 due to soft economic data from Eurozone and China, while referred to trade tensions as a potential serious threat for hurting global economy.
A reference was also made to a possible “No Deal” Brexit as risks to its outlook, saying it could also create market confusion on global scale.
To keep it real, we must note no major reaction was observed on Gold’s front during the release of the news and this could be due to the fact that the news were based on estimates.
Then again the news does not confirm that an economic crisis is coming, but does imply that economic growth may be reduced in the following year or so.
As a conclusion, we would like to make a reference to the updates on the US Sino front which seems to have an improved potential outcome.
It is now said that an agreement maybe brought forth with the tariffs being excluded, and more US products being sold to China in order to cover for the gap.
A cheaper US dollar could work in favor for the agreement to come forth as the Chinese will need less greenbacks to make the purchase and the US exports would also be benefited substantially.
In this case, we support the scenario of a weaker US dollar helping Gold prices move higher and make it a valuable asset for investors to consider.
Gold’s safe haven alias has been questionable in various periods of volatility during 2018 as U.S.-China trade tensions unfolded, with investors fleeing instead to the dollar.
Can this be turned around in 2019?
Gold is currently in a sideways movement between the 1291.14 (R1) resistance level and the 1280.24 (S1) support level.
In a bullish scenario we see the precious metal rising towards the 1291.14 (R1) resistance level.
Passing over our (R1) level could indicate a further advancement to the 1300.27 (R2) resistance barrier and a movement even higher could mean the shiny metal could reach our 1310.17 (R3) resistance level.
In a bearish movement a breach below the 1280.24 (S1) support level could mean a downward trend to the 1268.88 (S2) support level and even lower could be the 1259.78 (S3) support hurdle.