- Gold enters consolidation with eyes on the 21-D SMA.
- Technicals lean bullish with daily RSI turning positive.
- Key risk events to come, and the FOMC might be supportive to gold should the market sell the fact.
Gold has settled into a sideways drift after strong gains from $1289.77 to $1300.72 the high, currently trading at $1297.38 at the time of writing while the greenback corrects lower on Tuesday.
The benchmark ICE U.S. Dollar Index DXY, dropped from earlier gains to trade 0.2% lower at 93.828 the low as the euro rallies on headlines that the June 18th ECB meeting is a live one. The ECB could be on the verge of making an announcement as to when the Central Bank intends to stop buying bonds. The yield on the benchmark 10-year Treasury note also dropped 2.3 basis points to 2.912%, an additional supportive factor for gold. US data did little to roil up risk appetite either, (The ISM nonmanufacturing index increased 1.8pp to 58.6 in May, above expectations).
It would appear that investors are more concerned over the path of protectionist policies that the U.S. is taking, where equities ended pretty much flat on the day, with such risks leading to a degree of consolidation across the markets. Indeed, it seems that the Trump administration has turned down a package that included Chinese companies buying more agricultural and energy products from the U.S. However, earlier today, Republican Senate foreign relations chair, Corker, had said that both Republican and Democratic Senators are about to introduce a bill to force Trump to obtain congressional approval for imposing tariffs on national security grounds. On this note, the weekend will be interesting with the G-7 nations holding talks in Canada on Friday and Saturday; Trade and tariffs are likely to be discussed.
Key risk events
Then all eyes turn to The FOMC. Data on Friday showed that the U.S. created 223,000 new jobs for the month of May. Unemployment was down to an 18-year low of 3.8% reinforcing expectations that the Fed will raise interest rates at least two more times in 2018 following its March rate increase and June is already discounted in the price of gold. Then we have the historic summit between Trump and N.Korea’s leader, Kim Jong-un. Trump met with former North Korean spy chief Kim Yong Chol for about 90 minutes Friday — the highest-level North Korean official to visit the US in 18 years. Trump stresses that the Singapore meeting is part of a “process” that will go on for some time:
“I told them today, ‘Take your time. We can go fast. We can go slowly.'”
Gold levels
The price continues to consolidate around the 50-W SMA below just the 1300 handle but now above the previous weekly low down at 1282 and has eyes on a break of the 21-D SMA at 1300. The bulls need to get above the 200-D SMA, 1307, ahead of the 100-D SMA, 1324, that guards a reversal to the key 1360 level. The 100-W SMA is a key downside target at 1277.
Share
