05 August 2014

XAUUSD caught in conflict

Gold is currently trading around the middle of its 52-week range against USD, between a high of $1433.73 in August 2013 and $1182.57 in late December 2013.
  • ​​​​XAUUSD trading in the middle of a 52-week range
  •  Geopolitical tensions and dollar strength driving the pair
  •  Buyers waiting for pair to break next resistance level​
The precious metal has come under pressure recently, largely due to USD positivity which was notable with the stonking US GDP number of 4% last Wednesday. Despite lower than expected NFP figures at the end of last week, the market still has plenty of reasons to be buoyant regarding the greenback, with the good ISM Manufacturing figures also released on Friday hard to dismiss. Traders have been confused by XAU/USD in recent times.​ 

With geopolitical tensions rising in Ukraine and the Middle East, the thought would be a consistent flight to safe-haven instruments such as gold. The fading support for gold in the midst of these recent global tensions is notable though, as the market seems to shrug off the ongoing simmers worldwide. It has been said that buying gold is the original “risk-off” trade, with the ultimate background idea that the gold bars can be locked inside a vault stationed in the deepest depths of nowhere.

In times such as this, the market is seeing good signs from the economy in the US, and the Federal Reserve is entrenched in talk of timeframes for moving away from these policy implementations focused on economic recovery. XAU/USD is caught in a conflict, and it may take a shift in sentiment towards either the yellow or the green to move the price towards that aforementioned low or high.

 

What does this mean for traders 

Ultimately then, it is fundamental elements that are more likely to affect the price of the pair. Any boiling point with regards to geopolitical events may charge gold in the traditional fashion. The price of XAU/USD hit $1344.92 on July 10th but has since declined to it's current level.

After the highs seen in August 2013, and the even higher levels witnessed before then, consolidation has been the key word for traders involved in this market. The breaking of resistance levels is key now. Those levels, when breached, could possibly give the market the confidence to assume that this consolidation is fading and that the price may move into the top half of this 52-week range. At the moment though, XAU/USD buyers seem to be involved in a waiting game whilst consolidation and USD positivity prevail.

How will the Euro trade against the US dollar? Trade EURUSD as spot, forward and as an option today. 

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The value of your investments can go down as well as up.
Losses can exceed deposits on margin products. Please ensure you understand the risks.