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David Becker
Gold weekly chart, August 26, 2019

Gold prices surged higher on Friday in the wake of the Fed Chairs speech at Jackson Hole Wyoming and President Trump’s tweet. President Trump reacted to the Chinese retaliating to the recent Trump threat of additional tariffs with specific tariffs on 75-billion dollars of goods that are exported to China. China specifically targeted cars and agricultural product which hurts people who live in red states. It appears that China is playing hardball. Riskier assets tumbled following the tweet, as the dollar ease following the Fed’s commentary that they will be vigilant.

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Technical Analysis

Gold prices surged higher breaking through short term resistance at the 10-day moving average which is now seen as short term support near 1,509. Short term target resistance is the August highs at 1,534. A break of this level could lead to a test of the March 2013 highs at 1,615. Prices closed at a fresh 6-year high. Short term momentum has turned positive as the fast stochastic recently generated a crossover buy signal. Medium-term momentum is turning positive as the MACD (moving average convergence divergence) index generated is poised to generate a crossover buy signal. The MACD histogram is printing in the red with a rising trajectory which points to consolidation.

Trump Reacts to China’s Tariff Treat

President Trump said he was ordering US companies doing business in China to explore relocating their operations. His commentary came right after Fed Chair Powell said he would be vigilant about rates in the face fo a trade war. While President Trump has no authority to force companies to seek alternatives to Chinese supply chains.  It is clear that the trade war is not going to end any time soon and President Trump has not been able to deescalate these issues. Additionally, there are a number of Fed governors that are hawkish that see the economy as strong which creates a divided federal reserve. This means that rates, if they move lower, will be done at a slow pace.

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