Are the Bugs Back in Gold?

2018 saw a tectonic bid for Gold as the Russian and Chinese central bank led the charge for purchases. 2019 is seeing no different as China has added 360,000Oz of the yellow metal as the end of March 2019 amounting to a total gold holding of 60.62millionOz. Despite all of these bids and amidst increased global tensions in, Gold saw a lacklustre 2018 and this was largely due to overall dollar strength. We expect this to not be the case in 2019 as we expect a dollar weakness for the most part of this year – bolstered by an uber-dovish Federal reserve. This in effect would provide the necessary bullish momentum the precious metal has been lacking.

From a short term technical perspective, the price is trading within a ‘descending triangle’ pattern on the hourly chart [see H1 Chart]. Considering that there is a near term resistance area at the 1303 price region, we advise that traders place a buying order above this area.

Fig 1: Hourly (H1) XAUUSD/GOLD Chart

XAUUSD/Gold

Buy order @ 1304.20 (pending order)

Stop: 1,299.30

Limit: 1,311.00

Alternatively, a dollar strength due to carry-trade risk can seamlessly nullify the above outlook. There unconfirmed report that the US and China are getting closer to a deal should this eventually occur that should abruptly increase market sentiment for risk assets, thus driving capital flow from Gold to global risky assets. The aforementioned are very valid risks, thus we advise that traders always use a stop loss.

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