Gold 1 OZ (XAU=X) Prices Rise Above $1,600 on Simmering U.S.-Iran Tensions
Gold prices hit $1,613 an ounce on Jan 7, triggered by reports that Iran launched more than a dozen missiles at two U.S. military bases in Iraq. This was in retaliation to the U.S airstrike on direct orders from President Donald Trump that resulted in the death of top Iranian general, Qasem Soleimani, last week. Earlier this week, President Trump had tweeted that “should Iran strike any U.S. person or target, the United States will quickly and fully strike back, and perhaps in a disproportionate manner”.
This aggravated fears of conflict escalation in the Middle East, rattling global stock markets and sending investors scurrying for the safety of gold. The benchmark 10-year Treasury yield has fallen to 1.8% and the 2-year rate has declined to 1.54%. While, the S&P 500 pulled back 0.3% to 3,237.18, the Nasdaq Composite dipped 0.03% to close at 9,068.58.The Dow Jones Industrial Average closed at 119.70 points or 0.4% lower at 28,583.68.
Gold had last seen these levels in 2013. Just a week into 2020 and gold prices have already gained 3.4% primarily due to heightened tensions in the Middle East. Notably, this follows a stellar impressive 2019, which was quite an eventful year for the yellow metal. The major highlight was the yellow metal crossing the threshold limit of $1,500 an ounce. Gold prices gained about 19% in 2019 – its strongest annual increase since 2010, wherein it had reported growth of 29.5%.
Uncertainty in the U.S-China trade front, geopolitical concerns between the United States and the Middle East, the Brexit mayhem and concerns over the global economic outlook compelled investors to seek safe-haven investment options like gold in 2019. Further, three rate cuts by the Fed only added to the rally.
The ongoing sluggishness in the manufacturing sector will also prove beneficial for gold prices. Per the Institute for Supply Management’s latest report, the U.S Purchasing Managers’ Index (PMI) declined to 47.2% in December 2019, contracting for the fifth consecutive month. This along with the uncertainties regarding the U.S-China trade war and tensions in the Middle East will support gold prices. Further, a low interest rate environment works in favor of gold. Notably, lower the interest rates, lesser will be the opportunity cost of holding non-yielding bullion, making gold an attractive option for investors holding other currencies.
Rising gold prices bode well for the Mining – Gold industry, which has to contend with escalating production costs including the cost of electricity, wages, water and materials. The industry has outperformed both the S&P 500 Index and the Basic Material sector in a year’s time. While the stocks in the industry have collectively gained 54%, the S&P 500 and the Basic Material Sector have rallied 25.1% and 1.6%, respectively.
Overall, the bias in prices is: Upwards.
Note: this chart shows extraordinary price action to the upside.
By the way, prices are vulnerable to a correction towards 1,506.78.
The projected upper bound is: 1,582.73.
The projected lower bound is: 1,526.40.
The projected closing price is: 1,554.56.
A big black candle occurred. This is bearish, as prices closed significantly lower than they opened. If the candle appears when prices are “high,” it may be the first sign of a top. If it occurs when prices are confronting an overhead resistance area (e.g., a moving average, trendline, or price resistance level), the long black candle adds credibility to the resistance. Similarly, if the candle appears as prices break below a support area, the long black candle confirms the failure of the support area.
During the past 10 bars, there have been 8 white candles and 2 black candles for a net of 6 white candles. During the past 50 bars, there have been 30 white candles and 19 black candles for a net of 11 white candles.
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 63.6072. This is not an overbought or oversold reading. The last signal was a sell 0 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 70.90. This is where it usually tops. The RSI usually forms tops and bottoms before the underlying security. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 95 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 137.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a sell 23 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 buy 28 period(s) ago.
Rex Takasugi – TD Profile
PREC.M.XAU= closed down -20.488 at 1,553.400. Volume was 8,900% above average (trending) and Bollinger Bands were 122% wider than normal.
Open High Low Close Volume___
Short Term: Neutral
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 1,534.41 1,485.77 1,428.09
Volatility: 14 12 14
Volume: 7,732 1,546 387
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 8.8% above its 200-period moving average and is in an upward trend. Volatility is extremely high when compared to the average volatility over the last 10 periods. There is a good possibility that volatility will decrease and prices will stabilize in the near term. Our volume indicators reflect very strong flows of volume into XAU= (bullish). Our trend forecasting oscillators are currently bullish on XAU= and have had this outlook for the last 17 periods. Our momentum oscillator is currently indicating that XAU= is currently in an overbought condition.