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David Becker

Gold prices continued to consolidate as trader’s focus on trade tariffs and the risk on trade that allowed stocks to rally. Yields in the US continued to rise climbing to 3.04% the highest level since May of 2018. German yields also soared rising to 48-basis points which equal its August highs. A break of this level would lead to a test of the May highs at 65- basis points.  The rally in US yields has been matched by increases in German and Japanese yields which has kept a cap on the dollar. With the dollar continuing to trade sideways, and gold prices quoted in US dollars, gold bulls are having a tough time pushing prices higher.

Technical Analysis

Gold prices traded sideways and but was unable to move above short-term resistance near the 20-day moving average at 1,199. Additional resistance is seen near the 50-day moving average at 1,208. Short-term momentum is negative as the fast stochastic recently generated a crossover sell signal. Momentum as reflected by the MACD (moving average convergence divergence) histogram is neutral as the index is printing in the black with flat trajectory which points to consolidation.


Trade Drives the Capital Markets

The Trump administration reported that it would introduce 10% tariff on 200-billion worth of Chinese imports that would go into effect on September 24. The tariffs would increase to 25% by the end of the year if an agreement with China was not reached. The Chinese government immediately retaliated say that they would introduce tariffs on 60-billion worth of US goods.  Of course, they were threatened by the White House that any retaliation would be met with another tariff on 2657-billion worth of Chinese goods. President Xi is president for life making it difficult to negotiate given Trump has either 2 or 6-years left in his tenor as president of the United States. This appears to be a protracted trade negotiation.

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