XULF Report
Gold staged an impressive recovery yesterday reaching a high of $1394.64 attributed to a falling US Dollar against the Japanese Yen and the Euro. Due to the rapid gains of USD/JPY this year we are seeing a strong correction which has prevented gold from declining at the rate we witnessed in April and stabilize somewhat. Although the dollar should eventually begin to resume its bull trend as the Fed starts to wind down stimulus and more money flows from emerging markets into US Treasuries as investors seek out the right balance of safety and returns. The main news today will be the US Retail Sales and Jobless Claims 13:30 GMT although given the lack of trend in the Retail Sales this number is unlikely to cause any great shakes.
Gold staged an impressive recovery yesterday reaching a high of $1394.64 attributed to a falling US Dollar against the Japanese Yen and the Euro. Due to the rapid gains of USD/JPY this year we are seeing a strong correction which has prevented gold from declining at the rate we witnessed in April and stabilize somewhat. Although the dollar should eventually begin to resume its bull trend as the Fed starts to wind down stimulus and more money flows from emerging markets into US Treasuries as investors seek out the right balance of safety and returns. The main news today will be the US Retail Sales and Jobless Claims 13:30 GMT although given the lack of trend in the Retail Sales this number is unlikely to cause any great shakes.
Taking a technical perspective to predict gold’s movement in the short term is rather difficult due to the volatility, mainly ascribed to the USD/JPY, which has resulted in any trend having a very short lifespan. Stimulus tapering, slowing Chinese growth and a substantial USD/JPY correction are having conflicting effects on gold meaning its lacking any assertive direction. One thing worth pointing out is the price convergence on the daily chart that illustrates the opposing forces via a triangle pattern. Since April’s fall the trading range for gold is becoming increasingly tighter manifested by the triangle and a breakout could dictate the direction for the following weeks or even months. A push up towards $1420 again would break gold out of the triangle and generate momentum for surpassing the $1423.90 high achieved 6th June. A drop below $1345 would mean the bears have the upper hand and have the confidence to break down support of $1321 which was the low of the year.
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