Gold – Bullish case despite softness?

Gold looking soft but could still be a bullish case

The dollar is once again being favoured during the escalation of the trade spat, as yields on US Treasuries continue to head lower.

Whether this is a sign of Treasuries being the preferred safe haven during the stock market sell-off or a belief that the US will be least worse off, it’s very much consistent with what we’ve seen previously.

What’s more, it’s making life tough for the other traditional safe haven, gold. While the yellow metal typically performs well during periods of risk aversion, it also responds strongly to movements in the greenback and is therefore being dragged lower recently by movements in the currency. Gold is trading back below $1,280 today putting the focus back around the $1,265 lows of the last couple of months.

Gold Daily Chart

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One bullish case for gold at the moment is that it performed well during the fourth quarter after a stuttered start, perhaps that’s what we’re seeing now. The recent trend isn’t particularly favourable though and if $1,265 breaks, it may signal that this time is different. That’s obviously a big “if” for a level that’s currently being strongly defended.

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.

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.