On Thursday, gold showed a decline of more than 1.5%, rebounding from resistance at $ 1,350.
The decrease was predictable and triggered not so much by the fundamental factors but mostly by the impact of purely technical issues. First, the yellow metal has reached a very strong resistance level of $ 1,350, which is very difficult to overcome immediately. Secondly, during the last days, gold reached its maximum values in more than 10 months of trading, which led many investors to partially fix long positions profits in this instrument.
Fundamental factors also exerted a certain pressure on the yellow metal. First, the dollar index ended yesterday’s trading with a moderate 0.2% increase, which makes the yellow metal more expensive for many investors. Secondly, pressure on the price is exerted by positive news on the course of the US-China trade negotiations. Investors have a growing appetite for risk, which is often accompanied by a decrease in demand for precious metal, which acts as a risk-free asset.
Bloomberg reported that negotiations between the parties are moving very well. China agreed to increase purchases of American agricultural products by 30 billion dollars a year. Now the parties continue to develop a memorandum which will deal with non-trade restrictions, intellectual property and other issues.
In addition to geopolitical news today, economic news will also have an impact on trading. In Europe today, a large block of statistics is expected to be published, which includes inflation data and IFO indices for Germany. Also today, the ECB Head Mario Draghi will speak and the presentation of the Fed's monetary policy report is scheduled.
On the chart, gold within one trading day achieved the target noted in the previous review at 1325.00. But at this moment we do not see the formation of local reversal signals that indicate a possible resumption of the upward movement. Therefore, as a priority, we still consider the scenario with the continuation of the correctional wave in the direction of the new target at 1315.00
Resistance Levels: 1330.00, 1340.00, 1350.00;
Support levels: 1325.00, 1315.00, 1310.00.
The main scenario - a decline to 1315.00
Alternative scenario - consolidation above 1330.00 and growth to 1340.00
There are no signals on completion of the correctional wave on the chart. News background is also not on the side of buyers. Therefore, priority is still given to sales, which can be considered already at the level of 1330.00.
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