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  • Gold has been quote a show overnight, rallying from the pivot on broad dollar weakness and in a sigh of relief from market participants on the back of the US PI data coming in below market expectations. Gold is currently resting up at $1,224.37 highs having travelled over the course of the week so far from the depths of this weeks business down at $1,182.  

Headline CPI rose only slightly by 0.1% (0.059%) m-o-m in September, below the expectation of 0.2%.  Core CPI inflation came in at 0.1% (+0.116%) m-o-m, below  the consensus of 0.2%.  On a y-o-y basis, core CPI inflation remained at 2.2% (2.170%), below expectations  2.3% but essentially unchanged from 2.199% in the previous month. This helped the precious metal, that doesn’t offer a yield to surge to the highest in more than two months while also garnering back its safe haven status over the greenback amid a sharp retreat in global equities.

On Thursday, the Dow Jones Industrial Average extended yesterday’s rout and fell a further 545.91 points, losing an additional by 2.1%, to end the day down at 25,052.83 – This has brought its two-day decline to 1,378 points. Then, looking across to China, the Chinese CSI 300 index is the lowest we have seen since summer 2016. We have a similar story over in Europea, with Europe’s Stoxx index in the red by 2%, German’s Dax -1.4%, France’s CAC -1.8%, the UK’s FTSE -1.9%, Spain’s Ibex -1.7%, Italy’s FTSE MIB -1.84% and Portugal’s PSI 20 -0.82.  

So where now?

Under these conditions, investors are sitting on the sidelines waiting for developments and wondering what to do with their idle cash – Gold is a safe haven in times of such uncertainty and can continue higher while markets relent to the policies of normalisation and while investors realise their profits from the longest bull run in history, umped up by cheap money – that ship has now sailed.

The market has been overinflated for a long time and the question is whether the dip will be bought or the correction will extend for a longer period of time. Coupled with a US administration that is pushing an agenda of directing the dollar lower to help rebalance the US economy, at locker heads with China and the EU on trade, we could see a reigning in of the long dollar position that was built up in the second quarter. While investors ponder of what currency could potentially replace the dollar as a safe haven, Gold is an obvious and safe bet for now – but at what level is the question?

Gold levels

Gold has already burst through daily pivot points on the resistance levels and has exceeded the $1,214 26th August highs, (100% Fbio). The next Fibo extension is located at $1,235.02 as the 161.8%. $1,320 and the $1,236 is where the gravy is at though. This would set a fresh bull precedent  for longer in Gold. To get there, bulls need to cross the rising trendline support through $1,281, 28. May low.