XULF Report
After hovering in the $1390’s for most of yesterday gold had a surge reclaiming the $1400 mark last night spurred on by disappointing US ISM Manufacturing data that implied the Fed may postpone plans to reduce stimulus. The Fed wants to move on from the mixed bag of data at present before committing to winding down the programme which, in an odd way, means that poor economic numbers could lead to gains for equities and dollar-denominated commodities. USD/JPY dropped below the 100 yen level which also helped gold last night but given the overall fundamentals the pair are still well positioned to continue its bulls run driven by Japan’s aggressive QE plans and a buoyant stock market and the expectation that, even though there is mixed data from the US, a slowdown in stimulus is on the horizon and this will put pressure on gold in the long term.
Despite the volatility price is trading along a medium term bullish trend line on the 4 hour chart, although do bear in mind many bullish trendlines that have been drawn since $1338 level on 20th May across different timeframes have had to be redrawn because of erratic price movements therefore trade this trendline with caution. The angle on the trendline is mild enough to be sustainable however the heightened volatility signals the trend is weak. The latest 4 hour candlestick is printing as a harami offering an early sign for a short pivot trade but given the volatility consider shorter targets. The obvious target level is $1400 as there might be some buyers around this level and place a tight stop loss just above this morning’s of $1415. The medium term outlook is more bullish for gold as the 50 period MA is currently intersecting with the 100 period MA. If this crossover completes consider long trades as price bounces around the bullish trendline.
The economic highlights today are the Spanish Unemployment at 3pm and US Trade Balance at 8:30pm which is likely to impact the dollar and consequentially the gold market.
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