Bullion followed up with a selling momentum is the previous days, after moving in a sideways range it was in the previous week.
Gold has not been the center of attention until now in 2019, however our analysis below may prove useful for the medium to long term trader, who is looking for a heads up factor to make decisions.
Bullion – Awaking the sleeping giant
To start with, Gold has been in a bullish run for quite a while now, so a minor bearish momentum does not change things drastically, in our opinion.
However, Bullion’s relationship with the US dollar must be mentioned as they are significantly tied to each other, inversely.
Last night, FED chair J Powell comments came out more positive than anticipated by us and so boosted the US dollar further, having an adverse effect on Bullion. J Powell’s positive comments included,
“The US economy is in a good place”,
but also referred to low unemployment and inflation near target levels, backing his initial saying.
On the other hand, the previous sessions in the current week had been very optimistic for the greenback but that has not been the pattern it has followed until now in 2019.
Taking a look at the Dollar index, which display’s the greenback strength compared to other major currencies, we can see a very bumpy ride until now with no stable course in 2019.
The FED remains in a wait and see position and can keep the USD in a bearish sentiment.
In our view, this signifies some ambiguity for the US dollar, keeping in mind that in the US they have been through a governmental shutdown and other important matters are still looming.
At this point we must note, Gold’s talent as a safe haven may have exceeded the US Dollars dominance in the previous months, and was able to creep up moving out of sound and breaking above important levels.
Brexit Uncertainty affecting Gold Market
On another front, the Brexit uncertainty persists as the Brits have yet to land an agreement while the clock is ticking and EU expects a decision until the 29th of March.
We must note that, in our opinion, any scenario is possible, from a hard Brexit to a Brexit agreement, to a new referendum or even a possible general election.
So strong is the current uncertainty that it has started to show some effects on global scale.
Initially banks started moving money from the UK to Frankfurt, now companies are reducing business in the UK with the latest example being Nissan that decided not to build a new model at its factory in northeast England.
Even though Brexit has not been significantly related to Gold’s volatility so far, foreign investors in the UK, may have Bullion in mind, if the situation gets even worse.
Furthermore, Bank of England could be having a hard time forecasting growth for the UK with a no Brexit deal for the time being.
On a later stage, Gold prices could react significantly to the issue as London is considered a huge market and could be hurt in case of a worst case scenario, hard exit from the EU.
Australia expects interest rate cut in 2019
In Australia, the Reserve Bank governor admitted there is a chance they might be in for an interest rate cut due to growing economic risks.
To be fully informed, RBA was leaning towards a rate hike in 2018, but the economic global fundamentals may have sparked some worries to the Aussies, somewhat.
Also, Australia is one of the biggest gold miners in the world and any changes in their economy can backfire on their currency which has also influence on gold prices.
We did see a drop in AUD prices when the news was released, 2 sessions ago which was also followed by a subsequent drop in gold prices.
Reports state, Australia is concerned with inner issues like property value depreciation and the US Sino matter because of their relation to the Chinese economy and their trade interaction.
The precious metal from our perspective, should not be underestimated, compared to the levels it could reach.
2019 remains a very interesting and promising year but has many risks tilted to the downside.
Most of the effects of pending issues have not showed up in the financial markets yet, at least not in full power.
We believe gold could strongly react to the pre mentioned matters, so positioning yourself strategically is a must.
XAUUSD Technical Analysis
The most possible levels for XAUUSD in a bullish scenario is the break above 1310.17 (R1) resistance level, with the 1315.50 (R2) and the 1320.41 (R3) following up.
An ultimate bullish run could even reach the 1326.22 (R4) which was touched on the 31st of January 2019.
In a sideways run, the precious metal could remain between the 1310.17 (R1) resistance level and the 1300.37 (S1) support level.
In a bearish scenario, the shiny metal could a break below the 1300.37 (S1) support level, which could mean a stop even lower at the 1292.42 (S2) support level.