Gold price retreats as risk appetite increases


Gold price retreats to 1460 as US-China trade highlights increased risk appetite. What is the overwhelming market sentiment?

November 18, 2019 | AtoZ Markets – Gold had a modest run last week. The zero-yielding metal started last week with a 200-pips dip before picking up in the second half of the week. At the end of the week, the price closed almost at where it started. However, despite the rally, the market was slow and looks like lacking the required momentum to beat the 1474-1478 resistance zone. This is becoming evident this week as the price started with a 100-pips drop between the Asian and early London sessions. The current dip started at 1474 support-turned-resistance level. If the level continues to hold, the yellow metal might plummet further to 1420 or even the 1400 handle

For many months, the US-China trade deal has been the major driver of the Gold price. Its price, therefore, fluctuates with traders’ mood and psychology. The two countries have expressed optimism in recent weeks. However, due to the mixed nature of the headlines, last week volatility was low. In all, the mood in November so far is that of higher risk appetite. Risk-off assets like Gold, CHF and JPY have plummeted in November and will most likely continue perhaps for a little while. The Gold bearish run started from 1557 in early September and has lasted for over ten weeks. However, the bullish trend remains intact and maybe it will resume at some point especially if there is a breakdown in talks.

Gold Elliott wave analysis

Technically, the dip from 1557 is corrective. The price is completing a zigzag pattern. Whether the correction has already completed at 1445 remains to be seen. Meanwhile, from the Elliott wave perspective, there are two scenarios that look most probable at the moment. We looked at the first scenario in the last update with the chart below. If the price will go in this direction, it means the correction has already ended at 1445.

If the correction had ended at 1445, then we should see an impulse wave rally breaking above the corrective channel and even 1557. Wave 1 (darkened) has completed as the new chart below shows (All the charts below are from TradingView)

Gold price retreats

If the price stays above 1445 to complete wave 2 (darkened) and breaks above wave 1 at 1474, we should see wave 3 emerge toward 1520 resistance level. On the other hand, if the gold price retreats below 1445, buyers will have to wait for the price reaction at 1420-1400 support zone as the alternative chart below shows.

Gold price retreats

The rejection of the 1474 resistance level means speculative sellers could push toward 1420. However, exit should be at 1474 for intraday and swing speculators. A fast break above 1474 might lead to a very big recovery.

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