A golden Christmas

The final two weeks before Christmas is typically a time when market activity is grinding to a halt with Christmas parties, shopping and holidays taking precedence.

However this coming week is set to be one of the biggest of the year with a host of important events on the calendar including the UK general election, interest rate policy meetings for the ECB and Federal Reserve and most importantly President Trump's decision on new tariffs due to be implemented on December 15.

Gold is traditionally one of the best hedges to hold when there is a long list of short term unknowns. However, none of the factors mentioned above were enough to prevent the price of gold falling back towards recent lows last Friday.

The catalyst for the sell-off, an exceptionally strong U.S. November jobs report that saw the unemployment rate fall back to a fifty-year low of 3.5%, as well as positive comments on trade. A combination that prompted an unwind of the gold buying that quickly followed President Trump's sabre rattling earlier in the week.

In our last update on gold, https://www.cityindex.com.au/market-analysis/what-comes-next-for-gold/ we noted that “A daily close above the $1475/85 resistance zone is needed to further support the idea that a low is in place at $1445 and that the uptrend has resumed.”

The high in gold last week was $1484, at the upper bound of the $1475/85 resistance zone mentioned above. The subsequent rejection from here left the rally from the November $1445 low with a distinctly corrective appearance. This indicates that a counter trend Wave IV continues to unfold and that a retest and break of the $1445 low is likely.

Assuming a break of the $1445 low does eventuate, gold has the potential to test the $1430/20 support area and should a bullish candle form this location, it would be viewed as a potential Wave IV low and the set up for a long gold trade.

Keep in mind, a break and close above the $1475/85 resistance zone at any time would be confirmation that the uptrend has resumed and that a Wave V towards $1600 has commenced.

Source Tradingview. The figures stated areas of the 9th of December 2019. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

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