Gold could see a near-term downside reversal

After a downbeat European session, sentiment managed to recover in US trade, despite a continuation of Iraq concerns.


There was some positive data out of the US including the Empire State manufacturing index, industrial production and the NAHB housing market index. However, investors seem to be looking ahead to the Fed meeting.

The IMF was also on the wires downgrading the US growth forecast for 2014 to 2% (from 2.8%) and maintained 2015 growth at 3%. Major currency pairs just continue to hold tight ranges with uncertainty remaining the dominant theme.

Gold retreated from its highs in Asian trade after encountering a downtrend resistance which has been in place since April. The downtrend came in at around 1282 and the precious metal failed to close above this level. This could result in a near-term reversal to the downside. The yen was surprisingly subdued and even a round of impressive US economic data wasn’t enough to push USD/JPY any higher.

Spot Gold
IG Charts

Monetary policy minutes in focus

The AUD will be back in focus today ahead of the RBA’s monetary policy meeting minutes from the June 3 meeting. In the statement the RBA highlighted the exchange rate remains historically high, particularly given the further decline in commodity prices. However, given the local economy is looking to rebalance away from the mining sector dependence, perhaps this notion will slowly start to change.

Additionally it seems the moves in AUD/USD recently have been to do with low US yields. As a result, it is hard to position on RBA rhetoric alone. Most analysts feel RBA intervention is unlikely anytime soon. From a rates perspective, an increasing number of analysts are abandoning rate cut calls with Macquarie being the latest one to do so. Macquarie has moved from expecting a Q4 rate cut to a rate hike in Q1 of 2016.

Another flat open for the ASX 200

Ahead of the local market open, we are calling the ASX 200 down a couple of points to 5410. A slight positive is the fact the market managed to recover from the lows yesterday and finished the day in the black. This is generally encouraging as far as momentum goes. However, no doubt focus will be on the further slide in iron ore prices to 89. This will be the first time iron ore has traded below 90 since September 2012 when we went on to test a low of 86.70.

FMG recovered yesterday after announcing a $275 million investment in ships and some bargain hunting after testing $4. However, AGO is yet to see a bottom and just continues to struggle to find its footing. Gold miners might give back some of their recent gains today after the pullback in the precious metal. Worley Parsons had a great day yesterday on the back of a JP Morgan upgrade and its energy exposure. Traders could look to eye $17.50 in the near term as it is the resistance from the November 2014 gap. 

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. 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. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.