Gold to break neckline…
Gold spot at US$1,490 currently sits at the nexus of a short-term double top (bright purple line) neckline (blue bar) and upward trend support (green line), having retraced -4% since last Thursday on recent developments which reduced fear-driven gold demand.
If risk-on developments I’m alluding to continue – notably the repricing of Fed rate cut expectations, declining risk of a No-deal Brexit scenario on Oct-31 and calmer US-China trade talks – Gold is likely to face bearish pressure in the short-term as it’s usefulness as a recession hedge declines.
But retain long-term bull case…
However, having said that, I still think the bull case for Gold very much exists in the medium/long term with 1) US-China trade talks still some ways apart in delivering a meaningful agreement; 2) interest rates on balance remaining lower for longer with cuts priced in over the next 12 months from The ECB, Fed and RBA to name a few; and 3) Equity valuations at high multiples susceptible to downward re-ratings.
Buying opportunities ahead…
Should markets likely test August 13 lows of US$1,475 – 1,480. And further down, support areas in US$1,445 – 1,450 and US$1,435 – 1,440, a break lower may be an astute opportunity for those trying to initiate a longer-term Gold position given the downside risks to the global economy that still remain at large.
