Gold commentary [17/08/17]

News   •   Aug 17, 2017 10:42 +08

A combination of pseudo dovish FOMC minutes and President Trump dismantling his councils of wise CEO’s brought an abrupt end to the U.S. dollar rally of the past few days which in turn saw gold a beneficiary. As the chaos of daily life on the Hill in Washington D.C. and a nervous Fed sunk the dollar, gold rose from a low of 1267.70 to charge 15 dollars higher and close at 1282.70.

With gold making back all its losses from the previous day, it has opened bullishly in Asia, trading four dollars higher at 1286.50 in early trade. To act as the voice of reason, however, I must note that gold’s price action of the past three days has been entirely driven by the overall direction of the U.S. dollar in isolation. Therefore it is important to understand that golds ebbs and flows are not due to any factors in particular with gold’s appeal or not; rather traders are taking a view on the big dollar.

That said, from a technical perspective, the price action was impressive, and gold is now in shouting distance of both last week’s high at 1292.50 and the monster 1296.00 regions, a break of which could be suggestive of a structural, medium term move higher to a 1300 handle.

On the downside, initial support lies now at 1282.00 followed by the more import 1275.00 and 1267.00 levels. In the shorter term, and in the absence of any geopolitical headlines, traders should watch the performance of the dollar against its G-10 peers for clues to gold's short term direction.