Gold 1 OZ (XAU=X) likely to remain under pressure as long as Treasury yields continue to rise

Gold 1 OZ (XAU=X) likely to remain under pressure as long as Treasury yields continue to rise

Gold 1 OZ (XAU=X) likely to remain under pressure as long as Treasury yields continue to rise

Gold is likely to remain under pressure as long as Treasury yields continue to rise. Furthermore, a weaker U.S. Dollar is not expected to influence gold prices too much until all of the long-hedge positions in the greenback have been liquidated.

Gold prices plunged last week, producing its second largest loss of the year, on easing concerns over U.S.-China trade relations and a hard Brexit. Last week’s events drove up U.S. Treasury yields and demand for risky assets, encouraging investors to liquidate their positions in the so-called “safe-haven” gold market. The relationship between the U.S. Dollar and gold also fell apart.

Correlation between Dollar and Gold Deteriorates

The U.S. Dollar started to weaken on October 10 as investors began dumping hedge positions in anticipation of a trade deal between the United States and China. Traders also sold hedge positions in the U.S. Treasurys, which made interest rates go up.

The weaker dollar was offset by rising interest rates so foreign demand for gold was unaffected. As you know, during usual market conditions, foreign demand for gold increases when the dollar fades, but this clearly was not the case on Thursday and Friday. This serves as proof that interest rates exert the biggest influence on non-yielding gold.

Pressured by Limited US-China Trade Deal

Gold was capped and pressured at the end of the week after President Trump said China and the U.S. reached the first phase of a substantial trade deal that delays tariff hikes that were to kick in this week.

Late in the session on Friday, Trump told reporters at the Oval Office that phase one of the trade deal will be written over the next three weeks.

As part of this phase, China will purchase between $40 billion and $50 billion in U.S. agricultural products. Trump also said the deal includes agreements on foreign-exchange issues with China. In exchange, the U.S. agreed to hold off on tariff hikes that were set to take effect Tuesday.

Additionally, Treasury Secretary Steven Mnuchin said both sides struck an “almost complete agreement” on currency and financial services issues. Phase two of the deal will “start almost immediately” after the first one is signed, Trump said.

Positive Developments over Brexit

According to reports, a Brexit deal could be clinched by the end of October to allow the UK to leave the European Union in an orderly fashion, Irish Prime Minister Leo Varadkar said after what he called a very positive meeting with Boris Johnson.

Weekly Forecast

Gold is likely to remain under pressure as long as Treasury yields continue to rise. Furthermore, a weaker U.S. Dollar is not expected to influence gold prices too much until all of the long-hedge positions in the greenback have been liquidated.

Traders should also pay attention to interest rates in Europe. The closer German debt yields move toward positive, the weaker for gold prices.

Some bullish traders are also saying that a U.S.-China trade deal could actually be positive for gold prices because of increased Chinese investor demand.

Technical Indicators

Overall, the bias in prices is: Upwards.

The projected upper bound is: 1,530.53.

The projected lower bound is: 1,450.33.

The projected closing price is: 1,490.43.

Candlesticks

A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 4 white candles and 6 black candles for a net of 2 black candles. During the past 50 bars, there have been 24 white candles and 26 black candles for a net of 2 black candles.

Three black candles occurred in the last three days. Although these candles were not big enough to create three black crows, the steady downward pattern is bearish.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 38.9520. This is not an overbought or oversold reading. The last signal was a buy 7 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 46.00. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 32 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -74. This is not a topping or bottoming area. The last signal was a buy 7 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 0 period(s) ago.

Rex Takasugi – TD Profile

PREC.M.XAU= closed down -4.550 at 1,489.450. Volume was -0% below average (neutral) and Bollinger Bands were 44% narrower than normal.

Open     High      Low     Close     Volume___
1,494.0601,503.0931,473.9001,489.450 0
Technical Outlook 
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bullish
Moving Averages: 10-period     50-period     200-period
Close: 1,494.63 1,506.45 1,370.33
Volatility: 16 17 14
Volume: 0 0 0

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

PREC.M.XAU= is currently 8.7% above its 200-period moving average and is in an downward trend. Volatility is relatively normal as compared to the average volatility over the last 10 periods. Our volume indicators reflect very strong flows of volume into XAU= (bullish). Our trend forecasting oscillators are currently bearish on XAU= and have had this outlook for the last 22 periods.

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