Yuan Trade Providing Some Support For Gold
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Yesterday’s close: Settled at 1202.9, down 2.9
Fundamentals: Gold is higher this morning and responding to comments from Chinese officials that they do not plan to devalue the Yuan in order to fight the latest round of tariffs. The Dollar/Chinese Yuan relationship remains an extremely integral part of the Gold trade, more so that what we see in the Dollar Index which is 57% the Euro. On a technical basis, traders must keep an eye on two levels in both relationships; the 50-day moving average in the Dollar/Yuan comes in about -0.5% below the current price of 6.852 and the 94.00 floor in the Dollar Index; a move below both of these should encourage follow through and continue to relieve safe haven value from the Dollar while breathing life back into Gold.
Technicals: Price action is very firm this morning and we are seeing another attempt at first key resistance. Ultimately, there is a strong layer of resistance here and all the way up to 1220.7 with the 50-day moving average and last week’s peak falling in between the two levels. We need to see a move out above major three-star resistance in order to push the record Managed Money net-short position against the fence. In fact, we are already seeing the Commercials get ready for such; Commercials never go net-long and as of last week’s COT, Commercials are net long 13 contracts.
Resistance: 1210.9-1214.9**, 1220.7***, 1227-1228.5**, 1235.6**, 1244.6-1251.6***