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Price of Gold Fundamental Daily Forecast – Prices Being Suppressed by Stock Market Strength

By:
James Hyerczyk
Published: Oct 22, 2018, 08:37 UTC

Based on the early price action, it looks as if gold investors will be mainly focused on the stock market today, or demand for risky assets. If stocks continue to strengthen, led by a strong performance in China, then we could start seeing some profit-taking in gold.

Gold Bars and Dollar

Gold futures are trading lower after an attempt to rally earlier in the session failed to attract enough buyers to continue the move. The dollar is easing against a basket of currencies but this hasn’t helped gold futures because a 4.5% gain in China’s stock market could be a sign of an easing of tensions over the ongoing trade dispute between the United States and China.

At 0813 GMT, December Comex gold futures are trading $1228.20, down $0.60 or -0.05%.

Gold has been rangebound since last Monday when it surged to nearly a three-month high. The buying was fueled by speculation of another rout in the stock market but this didn’t happen and prices retreated into a range.

Gains were also limited last week by the hawkish Fed minutes which indicated the central bank would stay the course and raise rates gradually since this strategy was the best for the economy.

The bulls are trying to build a case for higher prices on the back of geopolitical uncertainties including a global economic slowdown, the U.S.-China trade conflict, tensions between Saudi Arabia and the West over the killing of journalist Jamal Khashoggi, developments related to Brexit, and Italy’s budget woes.

In other news, holdings in the world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, fell 0.39 percent to 745.82 tonnes on Friday.

According to the Commodity Futures Trading Commission (CFTC), gold speculators cut their net short position in COMEX gold contracts by 65,637 contracts to 37,372 contracts, the smallest since late July, in the week to October 16, data showed.

Forecast

Based on the early price action, it looks as if gold investors will be mainly focused on the stock market today, or demand for risky assets. If stocks continue to strengthen, led by a strong performance in China, then we could start seeing some profit-taking in gold.

There are plenty of potentially bullish developments on the fundamental side, but they may be only enough of a concern to underpin prices or prevent a rapid sell-off instead of launching a rally.

Looking at the chart pattern, clearly, December Comex Gold is being hemmed in by resistance at $1235.80 and support at $1222.70.

It’s going to take another steep sell-off in stocks or an escalation in one of the geopolitical events to trigger a breakout over $1235.80.

If stocks recover enough to encourage gold buyers to book profits after the recent run-up then look for a break through $1222.70.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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