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26.08.201910:36 Forex Analysis & Reviews: Gold rally halted, buy on dips

Análisis a largo plazo

Gold moved higher in US trading on Friday as China announced retaliatory tariffs on US exports and furious President Tump threatened further action.

Risk appetite collapsed at Monday's Asian open after Trump announced additional tariffs on Chinese exports and called on US companies to pull out of China.

Gold spiked higher with fresh 6-year highs above $1,550 per ounce as the US 10-year yield dipped below 1.45% and the Chinese yuan declined to 11-year lows.

Trump took a different tack on Monday with comments that China had called and wanted to return to the negotiating table and that a deal was achievable. In response, equity futures jumped and gold retreated to just below $1,530 per ounce as USD/JPY recovered sharply from 2019 lows near 104.50 to trade at 105.80.

Confidence in the global economy will, however, weaken further in the short term, especially given the corrosive impact of ongoing trade disputes. A series of comments from President Trump will also dent investors' confidence with strong demand for safe haven assets.

The Federal Reserve will cut interest rates again at the September meeting and the ECB will also announce a package of monetary measures next month. Global monetary stimulus will tend to support gold over the medium term.

If currency wars escalate, gold buying will intensify as fiat currencies come under sustained pressure.

CFTC data recorded an increase in long, non-commercial gold positions to 300,000 contracts from 290,000 previously. This was the longest net positioning since September 2016 and the fourth highest reading in 10 years. This positioning will maintain the risk of liquidation and sharp losses if risk appetite improves. Caution is, therefore, needed on aggressive long positions with patience required.

Exchange Rates 26.08.2019 analysis

*El análisis de mercado publicado aquí tiene la finalidad de incrementar su conocimiento, más no darle instrucciones para realizar una operación.

Tim Clayton,
Analytical expert of InstaSpot
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