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  • Gold was subject to dollar strength  on Friday.
  • Spot gold has been showing a slight intention of a correction but the dollar has been firm.

Spot gold has been showing a slight intention of a correction but the dollar has been firm and the sentiment is for a stronger dollar so long as there are uncertainties over world trade. The price fell from $1,208.49 and bottomed out at $1,192.77 in NY trade on Friday – Today, it has started out in Asia at  $1,194 and has made high of   $1195.12 so far.

Gold was subject to dollar strength  on Friday  after data showed that U.S. industrial production climbed by a bigger-than-expected 0.4% in August. That was the third monthly increase. At the same time, consumer sentiment in September rose to 100.8 from 96.2 in August. However, the  retail sales data were more downbeat, (sales rose just 0.1%.), with retailers in August registering the weakest sales in six months. The Dollar Index (DXY) a gauge of the buck against a half-dozen currencies, climbed by 0.4% to 94.928 in Friday’s session. It was supported by the U.S. and China trade war saga wherebyreports that USD200bn of new tariffs will be announced.  The risks are heightened now as China’s authorities may turn down the offer of trade talks with the US, doubting that President Trump, at least, has any real intention of scaling back the tariff war.    

What was somewhat alarming on Friday, however, was that the University of Michigan confidence survey reported that the largest problem cited on the economic horizon involved the anticipated negative impact from tariffs:

“Concerns about the negative impact of tariffs on the domestic economy were spontaneously mentioned by nearly one-third of all consumers in the past three months, up from one-in-five in the prior four months.” While US inflation indicators in the past week have surprised on the downside, the rumoured wide-ranging 10% tariffs will give US consumer inflation quite the boost, as they would cover half of all imports from China. The odds of the Fed having to respond in time will be a key question for markets going forward ” – analysts at ANZ explained.

Gold levels

To  convince the market that is otherwise heavily short of  gold and to reconsider its positioning, (net speculative short positions, or bets an asset’s price will fall, in gold, are up 275% year to date), then bears need to get above the 50-D SMA at 1211 and then the 200-W SMA at 1233. A retry of the downside should target 1146/22 monthly levels.

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