Despite an apparent flight for safety and sell-off in the dollar on
Monday, there was little love for Gold which usually does well in these
circumstances.
Gold was trading at a key resistance level around $1,170 where the
descending trend line – 22 January highs – intersects a prior level of
support and the 61.8 fib level – 18 May highs to 20 July lows.
Why did Gold not rally?
There are a number of factors that can drive Gold movements and while
it’s safe haven appeal is one of them, its role as an inflation hedge
appears to be more important right now. Probably because we find
ourselves in a low inflation environment and yet, the Fed is
contemplating a rate hike which could create more deflationary
pressures.
Can Gold go higher from here?
Of course it can but the driver of this move is more likely to be
changing rate hike expectations that uncertainty and risk aversion,
unless of course we see a much greater crisis. But this would more than
likely alter Fed plans in the process.
A growing number of people are already suggesting that the volatility
in Chinese markets which has now spilled over into Europe and the US
could force the Fed to hold off on a hike in September and maybe even
December.
What do the charts say?
At the moment they still suggest there is a bearish bias in the
markets. The failure at $1,170 on such a turbulent day for the markets
is a big rejection. It will be very interesting now to see if this is
tested again in the coming weeks.
If we see another run at these levels following a retracement, it may
suggest the market is becoming more bullish. Confirmation of this would
come from a break of the descending trend line and yesterday’s high.
Source:Internet Readings
