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Gold Edges Higher, Focus Turns To Earnings Season

Published 02/05/2019, 11:57 AM
Updated 07/09/2023, 06:31 AM
XAU/USD
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US500
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DE40
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DIS
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BNPP
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DX
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GC
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CL
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ING
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TWTR
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MyFXspot.com Trade Ideas

XAU/USD: buy at 1280, take profit 1360, stop-loss 1250

Market Overview

The key market driver in the incoming days will be the earnings season with reports from Twitter (NYSE:TWTR) and Disney (NYSE:DIS) as well as from financial companies including BNP Paribas (PA:BNPP) and ING (NYSE:ING). Besides, traders will price news from US-China trade negotiations and the risk of another US government shutdown. Positive news could push stocks higher in global markets, which movement could be accompanied by gold climbing 1350 USD. The opposite scenario is, however, more probable, especially after the recent rally.

The gold market is supported by growing inflation expectations, following the rebound in oil. With the Fed getting more and more dovish as real interest rates are falling, creating favorable environment for precious metals. It is, however, important, that the same factor is responsible for growing stock prices. However, positive correlation between the US S&P 500 and gold price has not been a long lasting phenomena over the recent years so one may expect it to turn negative over the incoming weeks.

The S&P 500 index has recently approached the 200-day MA at 2730 pts. and seems ready for downward correction. Closeness of this important resistance suggests that the market has already discounted most of the recent positive information, including better than expected financial results and bets on US-China meltdown. Meanwhile, US long-term yields may inch higher, pulling gold down to test the 1300 USD support.

Meanwhile, the German DAX approached its 100-day MA and can lose some of the recent momentum, in the short term. Looking into mid-term horizon, stocks are not likely to extend the recent gains as the US economy is heading into slowdown. On the other hand, it is possible that it will be far less severe than it was expected already in December. If so, investors may bet the economic sentiment to stabilize later this year and turn unwilling to cut stocks in their portfolio, especially the stable, dividend paying companies.

Economic research and trade ideas by MyFXspot.com

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