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Gold continues to rise amid geopolitical and economic risks

Jan 3 2019, 04:31 AM (CST) | Fortfs.com

Gold maintains the positive dynamics of the end of 2018 on the background of increased concerns on the global economy slowdown.

The sharp increase in demand for defensive assets once again increased significantly amid negative news from the United States and China. Even on Monday, very weak data on production activity were published in China, as PMI index fell to its lowest level in almost three years. After that, the People’s Bank of China lowered the average dollar exchange rate to the yuan.

At the same time in US, Apple published an outlook with lower forecast for sales growth for the 1st quarter of 2019, citing weak sales figures for its gadgets in China. These reports provoked a sharp decline in major stock indices both in the US and in Asia, which is traditionally accompanied by an increase in demand for so-called defensive assets. In the current situation, the greatest demand is observed for the Japanese yen, which gained against the dollar by 2.6%. Gold is still the main defensive asset, but so far shows a more moderate growth, + 0.75% since the beginning of the trading day.

Thus, the high risks for global economy might eventually have a negative impact on the economy of the United States, and this consideration contributes to the further development of the bullish trend for gold, which has already come very close to the psychologically important mark of $ 1,300 as the market can test this level by the end of the week.

Today, traders will closely monitor the publication of statistics from the United States. The greatest attention will be paid to statistics from ADP, as well as new data on the PMI of the manufacturing sector, where a decline is projected from 59.3 to 57.7 points. So far, the general news background indicates the preservation of the trend towards the strengthening of gold.

On the chart, we can expect the bullish movement to go on, the main goal for which is the level 1300.00. The price has already come very close to this level and against the background of the absence of reversal signals at smaller time intervals, we can expect that gold can take this mark already this week, after which we can see a more or less strong corrective price rollback. At the same time, in the long term, we can consider the possibility of further growth to the level  1350.00.

Resistance Levels: 1300.00, 1310.00, 1315.00;

 Support levels: 1282.00, 1269.00, 1260.00.

The main scenario - growth to 1300.00.

An alternative scenario - a breakdown of local support at 1290.00 and a decline to 1282.00.

Both tehnical and fundamental analysis indicate a high probability of a bullish trend continuing, therefore, we prefer only longs for the instrument, which can be seen already in the area of 1290.00.

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