Gold Surges to Multi-year High!

Lester Chua, CFD Dealer

Published On: 21 October 2019 | 11:00 AM

Gold and silver are often referred to as safe haven commodities, where people often flee to its relative safety in times of financial uncertainties and volatility. Gold prices has surged and is trading at multi-year highs, amid the ongoing trade war between China and US, unprecedented interest rate cuts by the Federal Reserve and Brexit.

Let us take a look at some of these possible catalysts that have driven Gold prices up!

Ongoing Trade War between US and China

The US-China trade war has escalated even further with the US blacklisting several Chinese technology companies and imposing visa restrictions.

In the meantime, China has clapped back fiercely with tariff on US goods, and is not yielding on critical issues like forced technology transfers, which the US has a grievance for. This trade war has further strained Beijing-Washington ties as both side are holding strong on their position and will not be backing down any time soon.

Federal Open Market Committee Rate Decision

The minutes of the Federal Open Market Committee (FOMC) which were released on 10 October 2019 pointed to a lower target band for the fed fund rate by one quarter percentage point, to 1.75% – 2%. This marks the first year that the rates has been cut since the Great Recession in 2008. The fed fund futures indicated a high probability of such a cut at the meeting to be held on 29-30 October, with further cuts to be expected down the road.

Ongoing Brexit Talks

With the entire year driven by Brexit drama, the fear of a no-deal Brexit drove investors towards gold and has left the pound vulnerable. The Bank of England has warned that a no-deal Brexit scenario could potentially shrink the British Economy by 8% and push the pound to a new record low. Brexit talks are likely to continue throughout the year as the chances of a Brexit deal happening soon are very unlikely.

Under UK’s Prime Minister Boris Johnson rule, will a no-deal scenario happen on 31 October, or will there be another Brexit delay?

Technical Analysis

By Chua Wei Ren, Technical Analyst

Stocksbnb – Technical Pulse: Gold SpotTechnical-analysis-gold-cfd

(Click to enlarge)

Based on our technical analysis, the long term trend for gold is still bullish. However, it may enter into a short correction in the near term.

  • There is a bearish shooting star below 78.6% of 05-1533.33.
  • Head and shoulder formation.
  • Tightening of the Bollinger band. This may signify a bearish breakout.
  • The key rebound areas are located at the demand level at 78.6% and 88.6% of 50-1557.08.

 

CHART LEGENDS

Bollinger Bands

Red dotted line = Upper band

Blue dotted line = Middle band

Green dotted line = Lower band

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