Gold Breaks Above 1,310, The Return of the Safe Haven

Gold is trading positive on Monday as investors are betting on the yellow metal as a safe haven ahead of a possible recession.
Mauricio Carrillo
Gold Breaks Above 1,310, The Return of the Safe Haven
Gold Breaks Above 1,310, The Return of the Safe Haven

Precious metals are trading higher on Monday. Gold is jumping to 2-month highs and silver is trading positive for the fourth day amid risk aversion environment.

Investors are watching the trade war, falling Treasury yields, and concern about global economic. They don’t like what they see. So, risk aversion is again with us.

XAU/USD is advancing for the fourth trading day in a row as the unit broke above the 1,310 resistance and jumped to trade at 1,320.

Silver is also extending gains for the fourth day in a row with the XAG/USD breaking above the 14.60 area and trading at 1-week highs at 14.75.

Copper is trading positive on Monday for the first time in the last five trading sessions. The unit found support at 2.6050, and it started to recover ground. It is now at 2.6340.

Palladium is trading back at 1,330 after finding support at 1,320. The upside is contained by the 50-day moving average at 1,375 but trading positive in the day.

Platinum is rallying on the first trading day of the month as the unit completed its consolidation period above 790.00 last week. On Monday, XPT/USD traded as high as 806.65, now at 801.00.

Dollar index is trading in consolidation mode after the decline performed on Friday amid speculations on interest rate increases. DXY is now 97.65, almost flat on the day.

Risk aversion takes the market

Like other days, risk aversion is taking the market, but the difference today is that gold is profiting the environment. The reason? Experts are speculating on three possible rate cuts in 2019. Three? Yes, three.

Everything would start in summer with an interest rate cut. The idea, according to experts, would be a total cut of 75 basis points in 2019.

Also, falling Treasury yields are underpinning concerns about the US economy. The market is focusing on how the trade war between US and China and other fronts like Japan or Mexico could push the country into recession.

In this framework, FX Empire analyst James Hyerczyk believes that despite the drums of recessions are in the market, investors should wait for more confirmations and a more mature move.

“I don’t think it’s a good time to think long-term because the market is still in the “stop and start” stage, meaning think about buying the dips rather than strength,” he said.

Gold jumps to highs since March

XAUUSD daily chart June 3

The yellow metal is trading positive for the fourth day in a row as investors are buying gold amid its safe haven status and dollar weakness.

On Monday, XAU/USD broke the critical 1,310 resistance and extended gains to 1,320. It is now in its way to test another important level, the 1,325. Above there, 1,330 and 1,345 emerge as the next frontiers.

Investors are betting on a recession in the long term so they see gold undervalued and they are taking position ahead of the storm.

Stephen Innes, managing partner at SPI Asset Management, recently said to CNBC that he sees a lot of traditional safe-haven hedging returning to the market.

“Markets are underpositioned and that’s why we are seeing investors aggressively chasing prices. There are bets getting placed on a more aggressive rate cut, another reason why we are seeing prices moving higher,” Innes affirmed.

Long story short, gold is trading higher on Monday as concerns about a global recession, more rate cuts, and a slow resolution of the trade war are hurting market sentiment. Then, investors are taking defensive positions in a cheaper gold.

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