Gold appears to have reversed trajectory

Gold at the time of this report, seems to be moving in an upward fashion, since last week. We note the potential for high volatility in the gold market, due to the numerous high-impact monetary policy decisions from various central banks including the FED, BOE and BOJ which are due to be released during the week. In this report, we aim to shed light on the catalysts driving gold’s price, assess its future outlook and conclude with a technical analysis.

Gold Market Analysis

FED’s interest rate decision is due out later this week

The Fed’s interest rate decision is due to take place this Wednesday. The majority of market participants are anticipating that the Fed will remain on hold during their next meeting and as such, the potential of the Fed remaining on pause may have weakened the greenback against its counterparts, as the Fed’s counterparts may continue hiking in the future whilst the Fed remains on hold, thus potentially further weakening the dollar.

As such given the inverse relationship between the precious and the greenback, the weakening of the dollar may have allowed for investors to purchase gold, as a weaker greenback would make gold cheaper for overseas investors and as such may have attributed to the rise of the precious metal.

London Bullion Market Association seeks to create a centralized database

According to Reuters, the London Bullion Market Association 或者 LBMA for short, called last Thursday for proposals from service firms in order to create a secure global database whose function would be to increase trust in the gold market’s value chain. This potentially being due to the fact that precious metal (gold) can be considered untraceable given that in can be smelted down and then re-formed into “new” gold bars. As such, any previous markings which may been used to identify or even trace the origins of the precious metal, could be theoretically wiped clean and thus may allow the “new” bar to conceal its origins by “gaining” a new identity. Furthermore, given the LBMA’s status a major gold hub it could potentially influence the acquisition of the precious from gold suppliers it may deem as non-compliant, thus potentially restricting slightly the supply of gold and combined with the potential increased costs to suppliers toprovide adequate documentation, it may be passed on to consumers, which could lead to higher prices of the precious metal.  However, for such an event to occur, the LBMA may need to enlist a coalition of nations to impose 和 enforce any potential legislation which may prove difficult given that it may not be profitable for certain 个国家 and their suppliers to enforce or provide the necessary documentation to the LBMA.

In conclusion, the LBMA’s intention to create a global registry of gold, is an interesting proposal, yet in our view it is likely that the proposal may encounter fierce resistance from nations who are more prone to illicit activities, or who may unwilling to lose their competitiveness as gold procurers, as producers 和 suppliers may be forced to bear the added cost. Therefore, despite the LBMA’s proposal, we do not anticipate there to be any significant market reaction.

Technical Analysis – Gold report

黄金/美元4小时走势图

• Support: 1915 (S1), 1902 (S2), 1885 (S3)
• Resistance: 1930 (R1), 1940 (R2), 1955 (R3)

The precious metal appears to be moving in a upwards fashion with the precious having tested resistance at the 1930 (R1) level, after having broken back up resistance turned support at the 1915 (S1) level.

We tend to maintain a bullish outlook for the commodity and supporting our is the RSI indicator below our 4-Hour chart which currently registers a figure near 70, implying a bullish market sentiment. For our bullish outlook to continue, we would like to see a clear break above the 1930 (R1) resistance if not also breaking above the 1940 (R2) resistance levels, with the next possible target for the bulls being the 1955 (R3) resistance ceiling.

For a bearish outlook, we would like to see a clear break below the 1915 (S1) support level, with the next possible target for the bears being the 1902 (S2) support base. Lastly, for a neutral outlook, we would like to see the precious metal remaining confined between the 1915 (S1) support and 1930 (R1) resistance levels, respectively

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