Gold Falls to 1,290 as Investors Give Up on the 1,300 Resistance

Gold and silver are trading weak as the metals couldn’t take profit from the risk aversion environment. Dollar index up for the fourth day.
Mauricio Carrillo
Gold Falls to 1,290 as Investors Give Up on the 1,300 Resistance
Gold Falls to 1,290 as Investors Give Up on the 1,300 Resistance

Gold is trading down on Thursday as the pair failed to break above the 1,300 level and bulls are now taking a breath. Risk aversion remains in the market due to the trade war and political tensions.

Silver is also trading negative, but copper is posting gains. The dollar index is moving up for the fourth positive day in a row.

Economic data and political tensions

Early in the day, housing data reported more starts and permits in March than expected with upside revisions. Also, initial jobless claims declined to 212K in the May 10 week, a more significant decline than the previously anticipated.

On the other hand, the trading tensions between China and the United States remains the dominant topic in the market. However, concerns about the Italian Budget and tensions between Saudi Arabia and Iran are fueling risk aversion.

Gold down for the third day

XAUUSD daily chart May 16

Gold is trading negative for the third day in a row after investors seem to have given up on its attempt to break the 1,300 resistance after several attempts this week.

“Gold seems to have reached a temporary detente at these levels with momentum too weak to push it either way,” OANDA analyst Jeffrey Halley said in a note to his clients. “The geopolitical premium appears to be baked into the price for now.”

Currently, XAU/USD is trading 0.36% negative on the day at 1,291. The pair is testing the 50-day moving average at 1,292. Technical conditions suggest more declines in the short term.

To the downside, please check the 1,280 level as support. Below that, 1,275 and 1,266.

The possibilities for a break to the upside are limited as the metal doesn’t look strong enough to do it.

As James Hyerczyk, FX Empire analyst affirmed in a recent article, “it’s not the headlines that will drive prices higher, but rather a combination of a weaker U.S. Dollar, lower Treasury yields and a drop in demand for risky assets.”

“Unless all of these factors weaken at the same time, gold is going to have a hard time attracting strong buyers,” He said.

Long story short, despite the market is inside a risk aversion environment, Gold is not taking profit because the metal is weak. The 1,300 is too hard for it as investors are on a wait and see mode for trade tensions but not too worried about the economy.

Silver remains pegged to the 14.80

XAGUSD daily chart May 16

Silver is trading sideways on Thursday as the 20-day moving average contains the metal at 14.86. Investors are reluctant to take a decision on which way the pair should go.

Currently, XAG/USD is trading 0.40% negative at 14.73. Technical conditions are pointing to the downside with 14.70 and 14.60 as significant supports.

Christopher Lewis, FX Empire analyst, suggests that the metal is not strong enough to move higher and it will need more momentum to go beyond near resistances.

“If we do, that could be the beginning of something rather significant, but it isn’t necessarily going to be easy. Based upon the falling wedge, we could see a move towards the $16.00 level, as the pattern measures.”

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