Uncertainty fuels safe-haven assets

Equity markets are lacking the momentum to push higher as concerns about Syria prompt profit-taking and a degree of caution.

Yesterday’s durable goods orders dropped by 7.3% in July against an expectation of 4%, which has not helped risk sentiment. Given that the number increased by 3.9% the previous month, it appears that the manufacturing sector may not recover as quickly as was initially hoped. This also tends to add fuel to the notion that US economic growth for the third quarter will not match the pace of Q2. Capital has therefore drifted to assets that are perceived as safer, such as bonds, yen and that traditional safe haven, gold. The threat of war and the ever-present US Federal Reserve taper mean that investors lack clarity.

The push through the $1350 resistance level has been the key to the current rise in gold prices. The fall from $1793 to $1180 per ounce between October and June amounted to a 34% decline for the shiny metal, and the ensuing bounce of 20% has brought us back to bull territory. Current levels of $1415 are testing the 38.2% Fibonacci retracement, and a daily close above this would embolden the bullish scenario and invite further gains. The 200-day moving average lies just above the $1500/oz level, but the $1487 juncture will need to be overcome before the market returns to this mean level.

Technically, a fall back through $1350 could undo all progress. Given how resistant that level was it should now prove to be supportive; a break and close below it would most likely negate much of the bullishness and ultimately amount to a false breakout. For now, the short-term charts and the daily RSI are registering that gold is marginally overbought. On the weekly chart, however, this is not the case, with the RSI currently pointing to 55.

The only certainty at the moment is uncertainty; a scenario that can ultimately be interpreted as positive for safe-haven assets.

Spot gold chart

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

CFD’s zijn complexe instrumenten en brengen vanwege het hefboomeffect een hoog risico mee van snel oplopende verliezen. 79% van de retailbeleggers lijdt verlies op de handel in CFD’s met deze aanbieder.
Het is belangrijk dat u goed begrijpt hoe CFD's werken en dat u nagaat of u zich het hoge risico op verlies kunt permitteren.
CFD’s zijn complexe instrumenten en brengen vanwege het hefboomeffect een hoog risico mee van snel oplopende verliezen.