Gold Traders Sidelined Awaiting Next Bullish Breakout

London (Jan 13)  Price action in Gold this week was relatively quiet as the precious metal finished a meagre 10bps lower. Appetite for risk caught bid as positive US-China trade war progress headlines coupled with a dovish Fed pushed the S&P500 and Dow Jones nearly 2.5 percent higher over the last 5 days of trading. 

Recent turmoil in the equity and credit markets has sent Gold on a steady ascent from its August 2018 low causing the safe haven to climb 10 percent since then. Although Gold’s upward momentum has waned since the start of the year, the bullish trend remains intact

Investor demand for Gold has increased as of late on the back of heating up inflation, lower interest rate projections and mounting recession fears. The commodity is now flirting with resistance nearing the $1,300 price range, its highest level since June of last year.

Looking ahead, lingering risks ranging global growth, Brexit and the US government shutdown just to name a few could easily cause another flare up in financial market volatility quickly sending investors flocking into Gold.

Additionally, developments that boost the Chinese Renminbi against the US Dollar may support further advances in Gold given the tight correlation between XAU/USD and CNY/USD. 

GOLD PRICE CHART: 30-MINUTE TIMEFRAME (JANUARY 02, 2019 TO JANUARY 11, 2019) (CHART 2)

Gold Spot Price Chart XAU/USD January 02, 2019 to January 11, 2019

 Spot Gold has pulled back slightly as previously mentioned and is starting to consolidate into a wedge, but the price now rests at its uptrend support line in addition to its 0.5 Fibonacci retracement level. Also, with the Relative Strength Index starting to send an oversold signal showing short term weakness, the indicator could be viewed as a strategic entry point for Gold bulls.

DailyFX

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