Gold Is Under Pressure As Risk Rallies
Axi | Apr 24, 2017 12:46
Originally published by AxiTrader
Gold is at an interesting juncture right now.
A week or so ago with heightened political risk after the US missile strike on Syria, heightened tensions on the Korean peninsula and some concerns over the possible outcome of the French election gold traded up to $1295 an ounce.
That level took it to, through, a dual trendline resistance which stretches back to the post-Brexit high of 2016 around $1375 and the 2011 high above $1900 before that.
So gold was already consolidating before being thumped to a low around $1265 this morning in the wake of the relief from traders and investors the world over that the French election went to the expected script with Emmanuel macron and Marine le Pen making it through to the second round.
That traders could cheer Le Pen making it through to the second round - and thus having a shot at the presidency - is best evidenced in their belief that she will be trounced in the second round by Macron. The polls suggest the second round will see 62% of the votes to Macron and 38% to Le Pen
The polls suggest the second round will see 62% of the votes to Macron and 38% to Le Pen. And given pollsters did a solid job in this first round of voting the confidence the market has in that result looks well grounded.
So we have a risk on tone in markets this morning with the Euro sharply higher, US and European stocks futures rallying solidly and gold under pressure here at $1273 as I write.
Now that the chance of France exiting the EU and thus rendering the European project dead are greatly diminished, if not entirely snuffed out yet, a large event risk for 2017 can be taken off the table.
That in itself reduces some of golds allure.
And the weekly chart suggests gold has a little further to pull back unless or until it can take out the $1295 region.
But the daily equally highlight that $1263 - the previous range top - looks like reasonable support. but with the MACD and stochastic pointing lower my system was already short.
$1264 was the initial level I talked about last week. But a move to $1250/54 looks possible and if that breaks the uptrend line from the 2016 low comes into the frame at $1233/35.
A break of $1263 has to happen to open up these possibilities first though.
Here's the chart.
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