European update – Gold gains in risk averse trade

Markets in risk aversion mode

We’re in risk aversion mode in the markets as investors prepare for the prospect of tariffs on Friday rather than a trade deal between the world’s two largest economies.

Source – Thomson Reuters Eikon

The breakdown in talks has really caught the markets off-guard. It seemed a deal was just widely accepted and basically priced in. Now we’re left wondering whether it will happen at all and what impact more tariffs will have on the global economy and markets. The next few days could be massive.

Gold bulls given a new lease of life

Gold is seeing some safe haven support today with a slightly softer dollar also giving it an extra lift. The yellow metal is yet to break through the peak from a couple of weeks ago – around $1,290 – but gold bulls will be very encouraged by recent price action. The failure to break below the low last week was a sign that the trend had weakened – as was its failure to pick up any real momentum after breaking below $1,280 – and now price action may be giving some bullish signals.

Gold Daily Chart

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A break above $1,290 could see $1,310 once again come back into focus, which coincides with the April peak. It’s worth noting that this doesn’t necessarily spell the end of the gold sell-off but just that the correction may be earlier and deeper than you would typically see. The potential breakdown in trade talks between the US and China naturally doesn’t help risk appetite and has given gold bulls a new lease of life.

Economic Calendar

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Craig Erlam

Craig Erlam

Senior Currency Analyst at OANDA
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the Wall Street Journal and The Telegraph, and he also appears regularly as a guest commentator on networks including Sky News, Bloomberg, CNBC and BBC. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.