Safe-heaven Gold is No needed by Economy? What is the prospect for 4th Quarter?

November 9, 2017

Sensitive to Fed rate hike expectations. Gold steadily appreciated during the third quarter of 2017, as heightened geopolitical tensions across the globe and political instability in Washington, accelerated the flight to safety.

Safe-heaven Gold is No needed by Economy? What is the prospect for 4th Quarter?

This article is originally referred from FXTM Market Forecast

With uncertainty becoming a recurrent theme amid the ongoing Brexit drama, Trump developments and North Korea tensions, investors rushed to safety consequently, elevating the yellow metal to a 13 month high of $1357.47 on September 8.

Although the instances of risk aversion may offer some support to Gold in the background, heightened expectations of higher US interest rates are likely to reverse gains and expose the zero-yielding metal to downside risks.

Economy dimming Gold’s glimmer?

As we head into the final trading quarter of 2017, strengthening dollar optimism fuelled by the US economy and rising prospects of higher interest rates, are likely to dim Gold’s glimmer.

With stock markets repeatedly hitting record highs and investors becoming optimistic over the global economy, the flight to safety is evaporating and as such, could result in safe-haven assets losing some allure.

As the era of cheap money comes to an end and central banks across the globe adopt a tighter monetary policy stance, zeroyielding Gold could be destined for further punishment.

Geopolitical Tensions could support Gold?

While the outlook for Gold is currently tilted to the downside, geopolitical tensions across the globe must not be overlooked, as they could spark risk aversion.

The North Korea, U.S. and Turkey tensions, coupled with uncertainty over Iran’s nuclear agreement, have the ability to rekindle the appetite for safe- haven assets.

With this being the case, Gold could turn volatile as Fed rate hike expectations attract sellers, while geopolitical risks magnetize buyers.

Technical Analysis on Gold market

Focusing on the technical picture, Gold is in the process of a technical bounce on the daily timeframe, with $1300 acting as a strong psychological resistance level.

Technical lagging indicators such as the daily MACD and the 50 Simple Moving Average, support the bearish outlook on the daily charts. Market players may be encouraged to exploit the strong resistance around $1300, to install heavy rounds of selling back down towards $1280 and $1267 respectively.

A situation where the yellow metal is able to break above $1300 may signal further upside, with the next levels of interest at the 1309.00 50% retracement and $1322 61.8% Fibonacci retracement level.

There have been consistently higher highs and higher lows on the weekly timeframe but prices have ranged since the sharp decline in the third week of September. Minor support can be found at $1260 and resistance at $1300.

The bullish trend on the weekly charts remains under threat if sellers are able to drag prices back below the $1260 higher low.

When implementing Multiple Time Frame analysis, monthly traders will closely watch how prices react to $1300, $1320 and $1360, which are all significant checkpoints if Gold attempts to rally to the upside.

With the prospects of higher US rates likely to boost the dollar, bears are still in the game and sustained weakness below $1260 could open a path towards $1225 and $1205 respectively.

Original Source: FXTM Market Forecast

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