Gold topping out?
Tony Sycamore May 22, 2020 2:10 PM
It should have been a relief today to find that the coronavirus pandemic which has dominated the headlines of the financial press since early March, had been relegated to side-line news. In its place, the top finance news stories today are mostly China-related, detailing a continued escalation in tensions surrounding the U.S. and China, a move by China to abandon its hard GDP target, as well as a plan by China to write a new national security law into Hong Kong.
It should have been a relief today to find that the coronavirus pandemic which has dominated the headlines of the financial press since early March, had been relegated to side-line news.
In its place, the top finance news stories today are mostly China-related, detailing a continued escalation in tensions surrounding the U.S. and China, a move by China to abandon its hard GDP target, as well as a plan by China to write a new national security law into Hong Kong.
The new security law, due to be presented today as a motion at the National People’s Congress (NPC) is aimed at outlawing activities that are perceived to undermine the central government as well as eliminating external interference in Hong Kong. In response to this prospect, stocks in Hong Kong have fallen almost 3% for the second day in a row.
Generally a rise in geopolitical tensions and sabre rattling as witnessed this week should be positive for gold, given its status as a safe haven. However, the price action following last week’s break above the $1747 high of April (in line with our call in early May here ) has been somewhat tepid.
“The rally from the March $1451 low appears to be missing a final leg higher above the April $1747 to complete a 5-wave rally.”
This raises the possibility that if gold has completed a 5-wave rally at this week’s $1765 high, it is on the verge of a significant corrective pullback. At the minimum the bearish divergence viewed on the RSI indicator on the daily chart warns that upside momentum is falling and a valid reason to tighten up stops on long gold positions.
More evidence that a pullback is looming is required. Should gold close this week much below $1735 it would leave a bearish weekly candle in place as well as bearish divergence via the RSI indicator on the weekly chart.
Presuming this occurs, a sustained break below support at $1710 would provide further confirmation that a medium-term high is in place and that a deeper pullback is underway into the $1550/1450 support region.
Source Tradingview. The figures stated areas of the 22nd of May 2020. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation
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.
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.