- European shares close to 11-week high
- U.S. stock futures clear 3,000 level
- U.S. consumer confidence data due at 1400 GMT
Gold prices edged lower on Tuesday as hopes of economic recovery lifted share markets with several countries easing coronavirus-driven lockdowns, although Sino-U.S. tensions over Hong Kong limited bullion’s losses.
Spot gold XAU= slipped 0.1% to $1,727.63 per ounce by 1221 gmt. U.S. gold futures GCv1 were down 0.5% at $1,727.50.
“We are seeing U.S. stocks breaking key levels to the upside, so that is adding little bit of selling pressure to gold which has otherwise been supported by the recent geopolitical worries regarding Hong Kong,” said Shayne Heffernan, CEO and founder of Heffx.
“Right now, there’s no key driver per se for gold which basically raises the chance of a correction or renewed period of consolidation.”
European shares hovered near an 11-week high, while U.S. stock futures rose 2% and breached a major chart barrier as businesses worldwide gradually reopened following a months-long lockdown.
However, offering some respite to gold were brewing trade tensions between the United States and China over a new security law to be enforced in Hong Kong.
White House National Security adviser Robert O’Brien warned that the proposed legislation may lead to U.S. sanctions on Hong Kong and China, and threaten the city’s status as a financial hub.
Gold is commonly used as a safe store of value throughout times of political and financial uncertainty.
On the technical aspect, only a clear recovery of $1,750 would open space for any rallies, while a decline below $1,725 would increase the probability of another test of $1,700 and potentially right down to $1,671-$1,675.
Market participants are expecting the U.S. consumer confidence report due at 1400 gmt.
Elsewhere, palladium XPD= dropped 1.1% to $1,969.79 per ounce and platinum XAG= fell 0.1% to $837.68, while silver XAG= rose 0.9% to $17.35.
Shayne Heffernan Trade Idea
- “Lower for Longer” interest rates are supportive of Heffx analysts’ positive view on gold. However, there is concern over the large divergence between record strong investor demand for gold and a record weak retail bid for gold (e.g. jewelry). Combined with reduced net buying from the official sector and a potential increase in gold recycling for the rest of 2020, We believe prices may make a slow grind higher but generally hold between US$1,600-$1,700/oz, rather than quickly spike to the US$1,850-$1,950/oz area. In turn, a global growth and EM recovery in 2021 could be what supports the next leg higher towards US$2,000/oz.
- Overall, we remain medium-term bullish. Forecasts for Q2 average gold prices are upgraded to US$1,710/oz and 2020’s average lifted from US$1,640/oz to US$1,680oz, while maintaining 2021’s average at US$1,925/oz.
Why This Matters
Gold shines when stocks are in a bear market, for safe-haven reasons, and that’s why market strategists suggest a small holding in all market cycles. “In a bear market, that’s when the risks really begin in the financial system and all the warts come out,” Shayne Heffernan, CEO and founder of Heffx.
When businesses weaken and bankruptcies pile up in a recession, scandals typically emerge, he says, noting that investors who own gold would be secure from that counterparty risk.
Because gold holds its worth better than stocks in a bear market, it may be sold if required to raise money.
Overall, the bias in prices is: Upwards.
By the way, prices are vulnerable to a correction towards 1,645.37.
The projected upper bound is: 1,795.56.
The projected lower bound is: 1,663.92.
The projected closing price is: 1,729.74.
A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 6 white candles and 4 black candles for a net of 2 white candles. During the past 50 bars, there have been 30 white candles and 20 black candles for a net of 10 white candles.
A spinning top occurred (a spinning top is a candle with a small real body). Spinning tops identify a session in which there is little price action (as defined by the difference between the open and the close). During a rally or near new highs, a spinning top can be a sign that prices are losing momentum and the bulls may be in trouble.
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.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 32.4821. This is not an overbought or oversold reading. The last signal was a sell 6 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 54.68. 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 buy 47 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 14. This is not a topping or bottoming area. The last signal was a sell 3 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 1 period(s) ago.
Rex Takasugi – TD Profile
PREC.M.XAU= closed down -3.401 at 1,725.792. Volume was 8,900% above average (trending) and Bollinger Bands were 43% narrower than normal.
Open High Low Close Volume 1,728.448 1,735.086 1,719.350 1,725.792 53,047
Technical Outlook Short Term: Neutral Intermediate Term: Bearish Long Term: Bullish
Moving Averages: 10-period 50-period 200-period Close: 1,732.47 1,673.48 1,562.37 Volatility: 13 26 20 Volume: 5,305 1,061 265
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.
PREC.M.XAU= is currently 10.5% 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 out of XAU= (bearish). Our trend forecasting oscillators are currently bearish on XAU= and have had this outlook for the last 0 periods.
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