Gold Market Returns To Value Area (1220.0-1225.0)

Posted Tuesday, August 28, 2018 by
Shain Vernier • 2 min read

Safe-havens have performed well during the early U.S. session, led by gains in the Swiss franc and Japanese yen. After a strong start to the trading day, December gold futures have entered negative territory. Amid the optimistic view of the equities markets, safe-havens typically struggle. However, that has not been the case for the past several sessions, as a fading USD has prompted some investors to seek superior returns in traditional safe-havens.

For many working-class individuals, the ultimate safe-haven asset is one’s home. This is certainly true in the U.S., with a majority of personal wealth typically being related to home values. Today’s release of the S&P/Case-Shiller Home Price Index (June, YoY) brought more questions to the U.S. real estate sector. The report came in at 6.3%, below expectations of 6.5%.

Lagging real estate performance is becoming a central theme of the American economy this summer. We will see if the pattern holds true for tomorrow’s Pending Home Sales (July) release.

December Gold Futures Technicals

December gold futures have broken above topside resistance on the daily time frame for the first time in months. The winds are definitely changing in the bullion markets.

December Gold Futures (GC), Daily Chart
December Gold Futures (GC), Daily Chart

Here are the levels to watch for the near future:

  • Resistance(1): Value Area, 1220.0-1225.0
  • Support(1): Daily SMA, 1214.1
  • Support(2): Bollinger MP, 1214.0

Overview: After an initial test of the bottom of value (1220.0), bullion has fallen back to the Daily SMA/Bollinger MP area. This is a key level, as there is a pending Daily SMA/Bollinger MP crossover. Today’s close will tell us a lot. A negative close will set up a possible position short, while a late-day rally will bring the top of value (1225.0) into play for the near future.

Tomorrow’s U.S. GDP (Q2) is going to be a primary catalyst for volatility in the gold markets. The industry consensus says that the lofty 4.1% figure will be revised down to 4.0%. If so, I will be on the lookout for moderate turbulence in U.S. equities and a bullish bump for December gold futures. In the event that GDP is held static at 4.1%, then a selloff toward 1200.0 is a possibility.

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