Gold prices pulled back this morning, having surged more than 5% over the past two sessions. It dropped below $3,380 overnight, having rallied up to $3,435 yesterday.
It seemed reasonable to expect some kind of pullback, or at least a period of consolidation, given the size of the gains over the first two sessions this week. And the catalyst for today’s retreat was the news that the US and China are preparing for trade talks this weekend.
Of course, these are only talks about talks, setting the agenda for more in-depth discussions to come. But the fact that the two sides are communicating is definitely good news. Traders took this apparent softening in the hardline attitude of both sides as a reason to lighten up on safe havens and increase their exposure to risk (equities).
Despite today’s pullback, could this week’s gains be the start of a move to fresh record highs? Or will it prove to be only a corrective bounce following the sell-off, which saw gold drop over 8% in little over a week? There are arguments for both perspectives. But what should be a slight concern for the bulls is that the daily MACD remains firmly positive.
Source: TN Trader
While this means that momentum is to the upside, it could also suggest that gold needs a longer period of consolidation, or a deeper pullback, to reset and find a base from which it can rally significantly.
On the other hand, there are a few features missing from this year’s leg of gold’s rally which took it to a series of all-times highs. Compared will previous significant rallies, this time European retail investors have been largely absent.
Secondly, the stocks of gold miners have failed to take off in the parabolic way they have done on previous occasions.
And lastly, silver has effectively left the battlefield, mired around $33 and still significantly below its own all-time high of $50 hit in April 2011.
Does this all mean that the gold rally has further to go? Or could it just be that ‘this time it’s different’?
