Gold under pressure to critical support on hopes for trade war break-through


  • Gold drops as markets turn risk-on following positive trade war news.
  • Beijing said that it wouldn’t retaliate against the latest tariff increases.

Gold prices have dropped in recent trade, falling from a high of $1,550.38 to a low of $1,525.34 as risk appetite in markets continue to recover, squeezing around 0.80% out of gold's performance on the day. The move is a significant chunk out of which had propelled gold prices higher in its rally earlier this month. Gold is on the verge of a 23.6% retracement which level stands around 1519 - A key level of support. 

Intermarket analysis

Looking at the intermarket influences, we have US stocks on the bid, with the benchmarks up over 1% following headlines that Beijing said that it wouldn’t retaliate against the latest tariff increases and that further escalation of the trade war wouldn’t help the U.S., China, nor the global economy.

The &P 500 and DJIA had each gained 1.3% shortly after midday, while the Nasdaq Composite was up 1.5%. The 10-year bond price is digging its way up from multi-month lows and is currently climbing at a rate of 3.59% at the time of writing - However, when looking at the charts, there is a bearish bias and any further escalation of trade wars or recessionary talk could tip yields over the edge and send the 10-year to break below the 2015 lows which would be highly positive for gold prices.  

Interestingly, the Dollar's negative correlation to gold is also weighing, but the consensus is that the Dollar could well start to attract safe-haven flows which could result in a loser correlation. Today, the DXY is trading +0.29% higher. Finally, USD/JPY is higher by 0.43% and is extending yesterday's recovery and the recent low of 104.44, currently trading at 106.56.

Gold levels

As mentioned, gold is on course for a 23.6% retracement of the Aug. 1 lows to recent swing highs. On a break of that support level, bears will look to the 38.2% Fibo of the same range which has been a prior level of support. The 50% comes in at 1478 which was also a level of support on the 13 Aug volatility and downside spike. The 61.8% retracement at 1460 guards the 19 July swing highs at 1452.93.  However, while holding above the 1,520-1,525 zone, bulls are still in the running for a test a break of 1,558 to open 1,590, the 127.2% Fibo target area.

 

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended content


Recommended content

Editors’ Picks

AUD/USD: Bulls continue to target 0.6300

AUD/USD: Bulls continue to target 0.6300

AUD/USD traded in a tight range and faltered once again just ahead of the key 0.6300 hurdle on the back of the renewed buying interest in the US Dollar and the widespread knee-jerk in the risk complex.

AUD/USD News
EUR/USD: Further gains look at 1.0600 and above

EUR/USD: Further gains look at 1.0600 and above

The weekly recovery in EUR/USD gave signs of some loss of momentum despite the pair hit new three-week highs around 1.0460 in a context dominated by the resurgence of the bid bias around the Greenback.

EUR/USD News
Gold remains on track to challenge record peaks

Gold remains on track to challenge record peaks

Gold price sticks to positive bias for the third successive day on Wednesday and trades near its highest level since November 1 above $2,750. The uncertainty around US President Donald Trump's trade policies turns out to be a key factor that continues to drive haven flows towards the precious metal.

Gold News
Dogecoin Price Prediction: Bulls target $0.40 rally as Trump officially launches Elon Musk’s DOGE

Dogecoin Price Prediction: Bulls target $0.40 rally as Trump officially launches Elon Musk’s DOGE

Dogecoin price rose 5% on Wednesday to reclaim $0.38 as Donald Trump signed the DOGE department into law. Media reports linking the Dogecoin logo to the official DOGE website sparked bullish speculations that a $0.50 breakout could be imminent. 

Read more
Netflix posts record quarter, as Trump talks tariffs on China

Netflix posts record quarter, as Trump talks tariffs on China

There has been a positive tone to risk this week, as the market digests Trump 2.0. However, Trump is not the only show in town. Earnings reports are also a key driver of stock indices, and the news is good.

Read more
Trusted Broker Reviews for Smarter Trading

Trusted Broker Reviews for Smarter Trading

VERIFIED Discover in-depth reviews of reliable brokers. Compare features like spreads, leverage, and platforms. Find the perfect fit for your trading style, from CFDs to Forex pairs like EUR/USD and Gold.

Read More

Forex MAJORS

Cryptocurrencies

Signatures