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September 3, 2018

IronFX, Gold Market Outlook - Will gold’s monthly seasonal patterns make a difference?

The world remains attached to uncertainties over the potential for more tariffs between the United States and China as part of their trade war.

This article is originally referred from IronFX News.

As the date for tariffs to be enforced gets closer, market participants are looking to be already positioned in order to follow the direction of the potential breakthrough.

On the contrary, other traders choose to sit back and watch without taking action mainly for risk protection issues or even out of curiosity of how the market will react.

Until now Bullion prices were losing ground and were seen as a victim of the broadly strengthening US dollar.

Market followers are confident that, should tariffs be enforced in the following week, Gold may be seen dropping lower than the $1,200 round number, confirming the fears.

However, the strong volatility of the precious metal in the previous week, could be a sign of an indecisive market ready to explode if breaking news are released.

Furthermore, the shiny metal was seen gaining 10 USD of value through various sessions and after some hours returning back to where it started.

This was done throughout the week, and in our opinion gold traders are not so sure how to deal with the recent trend lines up and down, regarding the medium to long term trading.

Some market reaction statistics also confirm the pre mentioned note, as per the COMEX gold contracts, were a reduction in net short positions was observed.

We would like to make it clear that, this not a guarantee for Gold’s future movement, as the general public in majority is wrong most of the time.

In fact, history confirms, September is the most active month for the precious metal’s advancement.

When compared to other months, average Septembers Gold trading provides the strongest gain in value with an average of 2.1% taking in mind all the years since it was first traded back in the 1970’s.

The past does not reflect the future as change is constant and nothing remains static, however during the unorthodox times we are going through, some confidence may be gained from Gold traders which is vital for their investments.

Moreover, September is a difficult month for equity’s which makes investors more attracted towards Gold to be utilized to safeguard value.

On the last day of August Gold’s prices declined as the dollar index rose. Analysts cited the US initial jobless claims were the reason behind the precious metals decline as it produced a higher figure than previously.

On other news, in an attempt to improve economic conditions, Venezuela’s government is planning to introduce certificates backed by physical gold.

These Gold backed certificates are aimed towards fighting the hyperinflation, the Latin American country is going through.

Also, in China the Shanghai Gold Exchange (SGE) publicized their plans to introduce a new spot contract of Panda Gold Coins.

More specifically, the panda Coins contract will be backed by 30 grams of standard weight coin with 99.9% in gold purity.

The coin will be traded with no leverage and quoted in domestic yuan.

In addition, the prospect of higher U.S. interest rates next month and towards the end of the year is of vital consideration for Gold traders.

Gold is highly sensitive to interest rates, while Fed Funds Futures currently imply a probability of 95% confirmed for the next hike to take place and so caution is advised.

However, day traders can be the biggest winners when it comes to Gold as the precious metal has been moving between ranges for the past week and most of the benefit for long term gain lies with long term investor’s which can purchase physical supply.

XAUUSD 4 Hour Chart

In this week’s analysis no changes in levels were made, as most of the previous week’s trading was in between our (R1) 1208.35 resistance level and our (S1) 1197.27 support level.

This range has been broken on the upward breaking our (R1) 1208.35 resistance level but later corrected and stabilized in a sideways motion.

The RSI indicator in the 4 hour chart above, is around the reading of 50 indicating an indecisive market.

The difference from our previous week’s analysis comes to the $1,200 psychological threshold, were the trading activity of Gold has been tied nearby.

If the Bullion is overtaken by a strong bearish movement, we could see it aim for our $1,197.27 (S1) support line and even breach it aiming lower for the $1,191.08 (S2) support hurdle.

On the contrary, if the precious metal is undertaken by a strong purchasing trend, we may see it breaching the $1,208.35 (R1) resistance level and aim higher for the $1,214.80 (R2) resistance barrier.

Original Source: IronFX News

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