Declines in the global stock market together with an increase in risk aversion may cause investors to be willing to buy gold again, which prices have risen today by $ 10 per ounce.
Today, futures for US indices indicate a decline of over 1 percent. In turn, the Japanese yen and the Swiss franc seem to be strengthening on the foreign exchange market, as well as contracts for US Treasury bonds. This combination from different markets seems to give a clear picture of the situation in which investors are worried about the future of the global economy.
These fears may be justified, for example by today's data from the euro zone and from Germany that did not delight. Another argument could be the minutes of the last meeting of the European Central Bank, in which some ECB representatives expressed their concern at the April meeting that inflation in the euro area remains too low and expectations of price increases are falling after years of failure to achieve the inflation target. The tension between USA and China also increased after the flagship newspaper of the Chinese Communist Party published two comments attacking American moves aimed at limiting Chinese companies - said Bloomberg agency.
Thus, deterioration in sentiment may again turn investors into gold. The futures jumped today by 10 USD per ounce from 1272 USD. It is worth noting that this is already the third increase in the price of gold from this area, at the moment when the US dollar index climbed to two-year high.
Chart: Gold, daily chart. Conotoxia trading platform
It seems that at the level of USD 1270 a very strong support was established and only if it is broken we may expect a larger price decrease. In turn, the nearest resistance may be set by the line drawn through the recent tops.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
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