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Gold Price Analysis: Critical Support at Risk of Break on Trade Wars and ETF Selling

Gold Price Analysis: Critical Support at Risk of Break on Trade Wars and ETF Selling

2018-08-31 11:00:00
Justin McQueen, Analyst

Gold Price Analysis and Talking Points:

  • Trade Jitters Keeps the Pressure on Gold
  • ETF Holders Continue to Sell Despite Bounce Back in Gold

See our quarterly gold forecast to learn what will drive prices through mid-year!

Trade Jitters Keeps the Pressure on Gold

The tensions between the US and China are likely to increase amid comments that President Trump is preparing to impose an additional $200bln of tariffs on Chinese goods as soon as next week. This in turn, is likely to prompt a retaliation from China, as has been the case on the previous occasions. Consequently, USD buying could prevail over demand for gold, which puts the psychological $1200/oz level at risk of a break.

Alongside this, Trump also rejected an offer from the EU to eliminate tariffs on cars, provided the US did the same. These comments from Trump prompted EU’s Juncker to state that the EU would be willing to raise tariffs if the US carried out such action. In turn, trade war concerns are back at the forefront of investors’ minds, spelling bad news for gold bulls.

Additional Analysis

Trade Wars: US Takes Aim at China and EU, Again – Nick Cawley, Market Analyst

ETF Holders Continue to Sell Despite Bounce Back

The continued outflows from the SPDR gold trust (world’s largest gold ETF) provides a telling sign that the bounce back in gold prices is fragile at best. Since July 23rd, holdings of the SPDR gold ETF has dropped some 5% amid the headwinds from trade wars, rising USD and record speculative short positioning. Subsequently, the drop off in gold ETF holdings poses a risk that gold could be heading lower once again.

Gold Price vs SPDR Gold ETF Holding

Gold Price Analysis: Critical Support at Risk of Break on Trade Wars and ETF Selling

GOLD PRICE CHART: Daily Time-Frame (November 2016-August 2018)

Gold Price Analysis: Critical Support at Risk of Break on Trade Wars and ETF Selling

Chart by IG

Gold Technical Levels

S1: $1200 (Psychological)

S2: 1180 (76.4% Fib)

R1: $1215 (61.8% Fib)

R2: $1236

R3: $1250


--- Written by Justin McQueen, Market Analyst

To contact Justin, email him at Justin.mcqueen@ig.com

Follow Justin on Twitter @JMcQueenFX

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