Market News & Analysis


Top Story

Gold on the edge as investors weigh conflicting macro factors

At the time of writing, gold was somewhat desperately trying to cling onto key support around $1480, finding mild support thanks to the stock market rally pausing for a breather. The precious metal fell sharply on Tuesday, partly because we saw further unexpected improvement in economic data and thawing of US-China trade frictions, both helping to underpin the buck and undermine haven assets. With bond prices falling and yields on the rise, investors are evidently reducing their expectations over aggressive rate cuts from global central banks. So, gold’s weakness makes some sense.

However, while further short-term falls look somewhat more likely than it did a couple of weeks ago, the longer-term outlook remains positive for gold. A potential trade deal might not be a bad thing for gold, after all. One has to remember that China is a big consumer of the precious metal. The prospects of a trade deal therefore boosts the physical demand outlook for gold both directly, and indirectly via a stronger yuan. So, I think the longer-term outlook remains supportive if you look at it from this angle. Also, with indices breaking to fresh multi-year or record highs in the face of declining earnings growth, the risks of a stock market correction rises by each passing day. A sharp retreat in equities should help to boost the appeal of safe haven gold.

But right now, the fundamental conditions are not as supportive as they had been before, and with Tuesday’s big drop the short-term technical outlook is also looking a bit more bearish now. A potential break and hold below key support at $1480 could pave the way for a drop to that longer-term support circa $1450. The bulls meanwhile will now want to see Tuesday’s losses being erased, or a distinct reversal pattern to unfold at lower levels first, before the short-term technical outlook turns positive again.


Source: Trading View and City Index.


Disclaimer

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

GAIN Capital Singapore Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the GAIN Capital group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), GAIN Capital Singapore Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact GAIN Capital Singapore Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither GAIN Capital Singapore Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

GAIN Capital Singapore Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.

Important Notice:

Cryptocurrencies are not legal tender currency and trading of derivatives on Cryptocurrencies are currently not covered under any regulatory regime in Singapore. Consequently, investors should be aware they do not have protection under the Securities and Futures Act (Cap. 289). Please ensure that you are fully aware of the risks.