Gold Prices on Pace to Post Daily Reversal

The price of gold rose in early trading on Wednesday as risk assets eased lower. The yellow metal is on track to post a reversal candle which could lead to a bit more upside.

Gold Daily Chart

Gold Daily Chart

Gold prices have caught a bid in European trading today after shedding nearly 4% in the month thus far. Precious metals are seen advancing as equities are under a bit of pressure.

The markets largely expected Trump to make an announcement yesterday relating to the trade war. Instead, the US president reiterated what he said on Saturday, that the US is close to reaching a deal.

Perhaps he back-peddled a bit by saying that he is open to putting more tariffs on China if they do not get the deal that they want. This part is unclear, but what is clear is that the equity markets are reacting negatively.

The S&P 500 managed to hold on to a small gain yesterday, but Asian and European markets have seen some fairly consistent selling pressure since they’ve opened.

In other correlated instruments, the 10-year yield has declined to a three-day low and the Japanese yen is continuing to edge higher. USD/JPY posted a fresh 5-month high on Thursday but has been edging lower since.

Technical Outlook

Gold is bouncing from a horizontal level at $1452 which marks the July high. A daily close around current levels would result in a bullish reversal candle on a daily chart.

But it might take a lot more than that for gold to regain it’s broader upward momentum. Gold has aggressively sold off after struggling at $1515 resistance for all of October.

The first major upside hurdle is seen at $1472. This marks prior support that held the yellow metal higher in September, on a daily close basis. Beyond that, I see a major resistance area between $1480-$1486. This is a zone that kept gold prices supported in October. The 20-day moving average trades near the level to create a bit of a confluence.

US CPI data will be released later in the day and can trigger a bit of volatility. Although prior releases have rarely caused notable price movements unless the figures are significantly off from expectations.