Hawaii Six O - Gary Wagner
Trade Dispute Concerns Once Again Move To The Forefront Of Market Sentiment
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Once again concerns about the escalation of the current trade dispute becoming a global trade war have raised and ratcheted up the uncertainty factor which has created a stronger dollar. However, much more importantly it has motivated traders to accumulate long positions in gold. Gold futures basis the most active August contract is currently trading at $1,246.70, is a net gain of $2.20 on the day.
Spot gold is faring much better today with a more substantial net gain than futures and is currently fixed at $1,246.20. Traders have bid up the precious yellow metal by approximately $6.60, and after subtracting $1.40 to account for dollar strength, gold is up $5.20 on the day.
The dollar recently tapered its upside momentum as a direct result of Thursday’s U.S. economic data. According to MarketWatch, consumer prices rose in June at the highest yearly rate since 2012, while weekly jobless claims fell by 18,000 to 214, 000, the lowest level in almost 50 years.
According to Naeem Aslam, chief market analyst at Think Markets, “The US economic data brought weakness in the dollar index, and this helped the gold price. Moreover, we do believe the trade tension (to some extent) is also providing some momentum for gold. Current negotiations between the United States and China have been moving further apart deepening the existing chasm between the two positions.”
While the deepening trade dispute and actual potential of a trade war have begun to be supportive of the safe-haven asset gold, this asset is still maintaining an uphill journey against the continued economic strength globally resulting in dynamically higher pricing in global equity markets.
Last night the European Commission forecast that the eurozone inflation rate would be slightly higher than their earlier forecasts, now being fixed at 1.7% in 2018 as well as 2019.
On a technical basis, gold future maintains a major support level at $1,238 which is precisely the lows achieved back in December and January. Resistance begins at the 0.78% retracement of the only major rally this year at $1,267 with major resistance at $1,288.
Lastly, there is the wildcard that U.S. President Trump is currently meeting in Europe with European leaders which will be followed with a meeting by Russian President Vladimir Putin which is scheduled for next Monday. These meetings could have a profound impact on the current geopolitical climate, which could undoubtedly carry over into the ongoing trade dispute.
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Wishing you as always, good trading,