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  • Gold bulls in control as trade wars remain a prominent factor in risk-off tones.
  • Bulls seek out the critical upside targets and Fibonacci levels.  

Gold prices continued to correct high from their  November lows, benefitting from a soft US dollar and US yields. Gold, in Asia, trades on a spot basis at $1,474.09 and is currently  +0.15% bid on the session. Gold has travelled from a low of $1,464.86 to a high of $1,475.43.  

The themes remain with trade wars and Brexit, but the markets were relatively quiet overall, with little in the way of fresh catalysts to renew another drive in the financial and commodities markets. Instead, investors remain on alert following the news that Chinese officials require scaling back in tariffs in which the US administration is unlikely to bow down to. At the same time and in more recent trade, there is the news that the US Senate has approved the Hong Kong human rights bill and is sending it to the House of Representatives – A possible antagonistic  move with respect  to trade relations between the US and China.  

All eyes on the Fed

“With President Trump resuming his pressure on the Fed to cut interest rates, just as Chair Powell embarks on his second pause in the last twelve months, some gold bugs are anticipating that the White House could be looking for reassurances that the Fed is ready to provide a backstop to the government should the trade war escalate  ,”

analysts at TD Securities argued.

However, gold may struggle to gain further traction should the market continue to factor out any further rate cuts from the Fed at this juncture – there is a  near-zero chance of easing at the December meeting as analysts at Westpac point out, noting  a terminal rate of 1.22% (vs 1.63% currently).

Meanwhile, overnight, Fedspeak continued and this time it was New York Federal Reserve president Williams who kept in tow of  the all too familiar post-FOMC meeting stance. Williams said that the economy is in a “good place”.  With respect to the US dollar and yields, the US 2-year treasury yields roundtripped  between 1.59% to 1.62% while the 10-years  initially climbed from 1.80% to 1.83% but were then sent back to 1.78%.  

Gold levels

Having found a base around the 23.6% Fibonacci target, gold is embarking on a test of the 21-day moving average with a confluence of the 38.2% Fibo retracement  of the Sep-Nov range. The 61.8% Fibo at $1,515 ahead of the 78.6% in the  $1,530s are critical upside targets.