- Gold is hoving just above flat for the session on Wednesday as risk sentiment flip-flops.
- There are some key resistance zones the bulls need to take out to gather momentum.
Gold 1-hour chart
The price action in gold has been lacklustre to say the least in recent sessions. It seems like investors are waiting for the next catalyst for a move rather than investing in the precious metal in these uncertain times.
Just yesterday there was an escalation of tensions between North Korea and South Korea when the North Korean’s attacked the communications office the two shared in the southern territory. Adding to this China and India became involved in a dispute at the border they share and 20 Indian soldiers were killed. Gold did not move an inch.
The main story is the continuation of the risk rally. Investors do not have anywhere to park their cash other than equities. Yields are suppressed by central bank bond purchase programs and equities seem to be the best option. Gold rallies in extreme risk-off events but at these elevated levels above USD 1300 per try ounce the gold bulls have disappeared.
A break of the resistance zones below would give us a big clue they are back. When stocks dump the dollar rises capping golds gains. When the dollar drops it usually due to a rally in risk assets. So at the moment, it’s a lose-lose situation for gold. If USD 1733 per troy once breaks on the upside then their could be a run at the yearly high of USD 1765.30 per troy ounce. It feels like it would take a second wave of the coronavirus to take us there but there could be a shock risk even on the horizon. In any case, these resistance zones need to be watched.
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