Gold Continues To Defy Sceptics

The street continues to be short and caught in gold as 2018 gets underway.

Gold continues to make more comebacks then Mohammed Ali, confounding critics (myself included) and soaring 11 dollars on Friday to recapture the 1300.00 level and close at its highs near  1305.00. The new three-month high represents a near 70 dollar rally from its mid-December lows near 1135.00.

Two cautionary points must be made though. Well over half of the rally was made in the last week over the holiday period on much lower than normal average daily volumes. Secondly, the Relative Strength Index (RSI) is now at very overbought levels. The RSI has been an excellent indicator of short-term price corrections in 2017.

That said, gold has clearly benefited from lower U.S. yields and a much weaker U.S. dollar into the year-end, and one also suspects, quite a bit of urgent short covering in a thin market. The old adage that the market can stay irrational longer then you can stay solvent appears to be alive and well in the gold market at the moment.

As global complacency over the trajectory of U.S. rates continues to be astoundingly low, precious metals, in general, should continue to benefit. Anti-pollution measures in China squeezing the prices of industrial metals heavily will also continue to provide an indirect boost.

Gold has opened positively in Asia, touching 1308.00 initially before correcting to a still respectable 1306.35. Gold has now traced out at double top at 1308.00, and this should be reasonably strong resistance intra-day. A break will open the road to the mid-September highs of 1314.50. Support is at 1302.00 and 1300.00 followed by 1294.00, Friday’s low.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Jeffrey Halley

Jeffrey Halley

Senior Market Analyst, Asia Pacific
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley is OANDA’s senior market analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes. He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays. A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV, Channel News Asia as well as in leading print publications including the New York Times and The Wall Street Journal, among others. He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley
Jeffrey Halley

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