The combination of USD weakness and intermittent risk-off sentiment has helped keep gold buoyed for the most part of the year; locked in a 1245 – 1300 range in the past two months. Wednesday’s release of the April FOMC minutes appeared of have increased the chances of a US rate hike this summer, boosting USDs and tanking gold to the bottom of the range yesterday (1245); with a failed break as in the chart below.
Fundamentally, the key drivers remain unchanged – China worries, global growth slow-down, US elections, Brexit, to mention a few; I believe the long gold trade is still very much a good play. The technical formation as seen on the dailies charts, indicate that we MAY soon be approaching a break out point for another strong leg higher, with the KEY TRIGGER a clean break-out through 1280, for an expected 1375 target.
I believe this week’s aggressive move lower provide decent risk-reward opportunity to initiate a long gold position in anticipation of break of the 1280 level, while keeping stop at 1225.
May the above view become reality, we would be into a new gold rush combined with instability due to Brexit vote in June and US rate hike anticipation.
About the Author
Oluwatobi Asu is a trader with over 4 years market experience and has worked with treasury of an international bank in its Nigerian, London and UAE offices. He has hands-on experience in trading Nigerian Fixed Income, G10 FX spot and EM rates markets. He has completed all three levels of the CFA examinations and is also Chartered Accountant (ICAN).