Gold coat-tailed the commodities rally overnight to post a one percent gain and close at 1281.70, unwinding all of Friday’s losses.
The mass arrests of prominent officials and businesspeople in Saudi Arabia appears to have spooked the markets with oil in particular and base metals all producing spectacular gains.
Asia has seen profit-taking set in after the overnight rallies and gold has fallen three dollars to 1278.50 at the midpoint of Asia’s session. As with other rallies driven by the geopolitics of late, we suspect this one may well be shortlived once the initial noise has died down.
The precious metals market is also ignoring president Trump’s visit to the Asia region. Given that most statements will be regarded as more of the same or political rhetoric, this is unsurprising. It would likely take some physical action by North Korea such as a missile test during the Presidential visit to ratchet up gold’s safe haven premium.
From a technical perspective, gold regained its 100-day moving average overnight at 1277.00 which forms initial intra-day support. A break of this level opens up the potential for a more significant drop to the trend line support at 1265.50. Following this is the long-term support zone between the 200-day moving average at 1262.25 and the October low at 1260.00. This region remains a must hold for bullish traders, and we continue to believe a break could lead to some possibly substantial long liquidation.
Resistance is firstly at 1284.60 followed by a formidable daily double top at 1291.60. Given the dollar remains firm, we will more than likely need an escalation in geopolitical risk so sustain golds momentum for an attack on the latter resistance.
As the dust settles on the overnight moves gold continues to range between its 38.20% and 61.80% Fibonacci retracement levels at 1299.00 and 1263.00, as it has since the beginning of October.