Gold Traders Playing Defense
Today’s Spotlight Market
Gold futures got a small bounce yesterday, driven by? defensive buying.? Greek bonds fell for the fourth consecutive trading day on fears that the nation may begin distancing itself from the EU.? Greece has been rolling back or considering rolling back some of its austerity measures, such as restoring the income tax-free threshold.? Greek Premier Tsipras also pledged to increase the minimum wage and put the brakes on infrastructure privatization, which was viewed negatively by bond holders.? The new Greek government is considerably more nationalistic and socialist compared to the prior regime and there are indications that the government will not accept additional aid to continue paying loans.
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Fundamentals
In addition to safe haven buying due to the Greek situation, traders were playing defense due to the escalation in military action in Ukraine.? President Obama called out Russia for violating essentially every provision of the ceasefire.?? The US is leaving every option on the table, including providing weaponry to the Ukrainian government.?? While Gold can be viewed as a defensive instrument, Greece leaving the EU could cause further declines in the Euro, which could be seen as negative for Gold.? Some of yesterday?s gains can be attributed to profit taking.? In addition to the geopolitical queues, Gold has had a positive tone due to seasonal demand trends.? However, Indian demand has been somewhat subdued, which has caused local prices to trade below benchmark levels. India imported a substantial amount of Gold last year, which could curb further imports this year, given the lackluster demand.
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Technical Notes? -? View Today’s Chart
Turning to the chart, we see the April Gold contract pull back after hitting 1300 in mid-January.? Prices have fallen below the 20-day moving average, suggesting that a near-term high may be in place.? Prices have held the 50-day average thus far.? April Gold has also held near-term support near the 1231.50 level so far.? Failure to hold 1231.50 could result in prices testing the 1175.00 mark on the downside.? Recent selling may be overdone, as the RSI indicator is now reaching oversold levels, which may be seen as supportive in the near-term.
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