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- Author of the entry: Mennica Skarbowa
- Date of entry:
Gold slowed down slightly in the week after Christmas. The price per ounce fell by about $10 to $1,284. This was mainly due to investors' reduced concerns and fears related to the presidential elections in France. The improvement in sentiment was also felt after Monday's data from China, which resulted in rising US indices, falling precious metal prices, and a higher yen valuation.
Chart 1: Gold in the long term
Chart 2: Gold and CFD on SP500, 1-hour interval
Polls have shown that support for the National Front candidate, Marine Le Pen, is waning. This clearly suggests that if another candidate wins the French presidential race, it will trigger a so-called "relief rally" – capital will flow towards riskier assets and the euro will gain.
At the very beginning of last week, the market learned about the pace of growth of the Chinese economy. It turned out that in the first quarter of 2017, its growth was the strongest since the end of 2015. The picture we saw is a result of the economic boom in the local real estate market. On Monday, SP500 index futures rose sharply, the USD/JPY pair rose to 109.0, and gold fell to $1,281 per ounce.
On Tuesday, the dominant news was Prime Minister May's announcement of early elections, scheduled for June 8. This resulted in a strong appreciation of the pound sterling. Gold lost value in the first few minutes, but began to rise sharply during the US session.
In the second half of the week, we learned some important macroeconomic data from the US. The Philly Fed reading disappointed, coming in at 22 points, while 25 points were expected. Friday's preliminary PMIs for the industrial and service sectors fell below the consensus. This information caused the dollar to be overvalued. The gold market had a successful Thursday and Friday session.
From a technical point of view, gold has undergone a technical correction over the last five sessions. Its range was similar in scope to the two previous corrections (at the end of March and in the first half of April). This is evidence that the gold market is currently moving in a highly "technical" manner. The price also stopped at an important support level resulting from the Fibonacci level (38.2%). Friday's increases in the metal stopped at the upper limit of the flag formation. Breaking this line will give a buy signal and thus open the way to the level of $1,300 per ounce. If the first round of the French elections is positive for the financial market, it is very likely that the metal will again test the medium-term upward trend line (around $1,270 per ounce).
Chart 2: Gold quoted in USD, 2-hour interval
From a technical point of view, gold has undergone a technical correction over the last five sessions. Its range was similar in scope to the two previous corrections (at the end of March and in the first half of April). This is evidence that the gold market is currently moving in a highly "technical" manner. The price also stopped at an important support level resulting from the Fibonacci level (38.2%). Friday's increases in the metal stopped at the upper limit of the flag formation. Breaking this line will give a buy signal and thus open the way to the level of $1,300 per ounce. If the first round of the French elections is positive for the financial market, it is very likely that the metal will again test the medium-term upward trend line (around $1,270 per ounce).
Chart 2: Gold quoted in USD, 2-hour interval
Arkadiusz Kłosiński
Mennica Skarbowa S.A.
Mennica Skarbowa S.A.
