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Gold prices are quoted at $1774 at the time of writing at the start of a new week. Analyst and technical forecaster Richard Perry of Hantec Markets says for now it appears the bulls are taking a breather.
Anyone trading gold on Friday may just as well have gone back to bed, as the market completed the smallest daily range (just $5) of 2020. Last week we focused on the four week uptrend, which had been briefly breached by the Nonfarm Payrolls volatility but essentially remained intact.
This support of the uptrend could well be broken simply by consolidation this week. What this does mean is that the bulls who have been driving the market to new multi-year highs last week, are just taking a breather.
The question is whether this turns into a near term slip or is the precursor to the next leg higher. Support in the band $1757/$1764 will determine this.
A closing breach of $1764 could see a drift back towards $1744/$1747 which is the next area of old breakout support.
Momentum in the run higher is just beginning to tail off slightly, but for now retains its positive configuration (with daily RSI above 60 and Stochastics above 80).
Trading above $1764 we are still bullish on the near term prospects of gold to push above $1789 and into the $1800s (an upside implied target for the next few weeks can be derived around $1820).
Below $1764 we look to use supported weakness towards $1744 as a chance to buy.
Markets: Risk On
There is a distinctly risk positive bias that has started the new week. There does not seem to be any significant reason behind the move (so perhaps a degree of caution needs to be taken here), but Asian equity markets have been decisively bid overnight.
Chinese media have been pushing a “bull market” narrative over the weekend, and it is interesting to see the Shanghai Composite over +5% higher today.
This bullish theme has leaked into forex major which are taking a risk positive skew which is benefitting higher beta majors at the expense of the safer havens.
The Aussie and Kiwi are strong outperformers (this coming a day ahead of he Reserve Bank of Australia expected to talk up the economic rebound prospects for Australia). After Friday’s public holiday in the US, we see Treasury yields picking up too (along the risk positive theme).
However, it is important to note that many of these moves are still within ranging patterns and there would likely need to be something more substantial for a decisive breakout of recent consolidations that have taken hold across many major markets.
For this morning, traders appear to be looking past elevated levels of COVID-19 infections, but if the death numbers accelerate, this may not last long.