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David Becker
Comex Gold

Gold prices continued to rally surging higher by more than 2.3% as concerns over the US-China trade war spilled over into surprise monetary policy moves.  Three central banks cut rates more than expected on Wednesday which is a sign of weakening global growth. US yields tumbled, with the 30-year yield hitting an all-time low.  Chinese officials were on the tape on Wednesday saying that they believe they can outlast the US government with regard to the trade war. They are now willing to sit back and wait until the current tariffs begin to erode the US economy. The yuan was fixed weaker on Wednesday.  It was the highest fix for USD/CNY since 2008. PBOC officials reportedly told foreign firms earlier that the yuan won’t continue to weaken significantly.

 

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Technical Analysis

Gold prices surged higher on Wednesday and are poised to test higher levels as positive momentum continues to accelerate higher. Resistance is now seen near the March 2013 highs at 1,616. Support is seen near the 10-day moving average at 1,443. Short term momentum has turned positive as the fast stochastic generated a crossover buy signal and continues to accelerate higher. The fast stochastic accelerated higher and is now printing a reading of 95, well above the overbought trigger level of 80 which could foreshadow a correction. Medium-term momentum has also turned positive as the MACD (moving average convergence divergence) generated a crossover buy signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses above the MACD signal line (the 9-day moving average of the MACD line). The MACD histogram is printing in the black with an upward sloping trajectory which points to higher gold prices.

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Central Banks Cut More than Expected

Policymakers in India, New Zealand and Thailand moved aggressively to support growth and inflation, all cutting interest rates by more than expected. Those moves raised concerns about the extent of the potential spillover from the trade conflicts. Reserve Bank of New Zealand surprised markets with a 50 basis point rate cut to 1.0%.  Consensus saw a 25 basis point cut. Reserve Bank of India surprised markets with a 35 basis point cut to 5.4%.  Consensus saw a 25 basis point cut. Bank of Thailand surprised markets with a 25 basis point cut to 1.5%.  Consensus saw steady rates

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