Gold Price Analysis: Key Support in Focus as Yuan Eyes Psychological Level

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Gold Price Analysis and Talking Points:

  • Gold Softens as Yuan Eyes Retest of 7.00 Level
  • Fed Remains Upbeat, USD Buying Continues

See our quarterly gold forecast to learn what will drive prices through mid-year!

Gold Softens as Yuan Eyes Retest of 7.00 Level

Gold prices have struggled to push higher with a lack of buying interest to take the precious metal above 1240. Alongside this, with the rally in the Chinese Yuan at the backend of last week fading, gold prices are on course for its largest weekly decline since August. The Chinese Yuan is trading at 1-week lows and is continuing to trend lower with USDCNH on course to make another retest of the 7.00 handle. Amid the midterm election outcome, the Trump administration is likely to re-focus their attention on the current trade spat with China. Optimism over a trade deal in the near-term between the US and China had been boosted last week as Trump had reportedly asked officials to draft a possible trade deal. However, immediately after the midterm election, this optimism had faded with the US looking to impose new duties on Chinese aluminium sheet products, which in turn could see Gold prices pressured in the near-term.

Fed Remains Upbeat, USD Buying Continues

Last night saw the latest FOMC announcement, which gave little in the way of new information. The Fed are largely in a pre-set course which will see them raise rates at December, money markets pricing in an 80% probability of a hike. Recent volatility in financial markets had been dismissed by the Fed, who highlighted that the underlying US economy remains strong and as such, USD and US yields rose, consequently sapping demand from the precious metal, despite the softer tone in equity markets.

GOLD TRADING GUIDE

GOLD PRICE CHART: Daily Time-Frame (Feb-Nov 2018)

Gold Price Analysis: Key Support in Focus as Yuan Eyes Psychological Level

Chart by IG

Momentum remains weak for gold prices with support at 1208 the next target for sellers. A close below the 23.6% Fibonacci Retracement raises possibility of a move south of the 1200 level. Eyes are on the Chinese Yuan for further downside, which has increased its influence on the precious metal relative to the USD.

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— Written by Justin McQueen, Market Analyst

To contact Justin, email him at Justin.mcqueen@ig.com

Follow Justin on Twitter @JMcQueenFX