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XAUUSD - Eases Lower to Support at Key $1200 Level on Trade



XAUUSD - Eases Lower to Support at Key $1200 Level on Trade
Despite rallying well in the last week or so, gold has started to ease a little lower in the last couple of days to the current key $1200 level where it is enjoying some support. Only a couple of weeks ago gold endured a strong fall down to its lowest levels in 18 months to below $1160. It has therefore done well to rally higher back to the key $1200 level and regain some of the losses. Just prior to the sharp fall, gold was able to consolidate a little around $1210 and take a breather, however it remains firmly entrenched in a medium term down trend.

Throughout the second half of June gold dropped sharply to fall to a then low for 2018 below $1240 before being propped up at this level. The key level of $1240 had been a steady rock of support in the last 12 months for gold so it is reasonably significant that it has now broken down through it and then some. Just prior to the sharp drop in early June, gold was quite content to trade within a narrow range and consolidate above the $1290 level, up to around $1310. Just prior to this consolidation gold was sold off quite strongly from the resistance level at $1360 after making another run at this key level. The $1290 has been significant for gold of late and should it rally it will likely met some resistance at this level.

After falling for several years up until the end of 2015, which saw it fall from its all-time highs down to around $1050, gold has done well in the last few years to regain some of those losses, although it is really returning the gains in the last few months. It had climbed back above $1300 on several occasions since then and generally in the last 15 months it had been steadily climbing higher from around $1100.

The US dollar has continued to strengthen pushing the price of gold lower again.There is little doubt that is demand for risk aversion presently which has normally assisted gold however currently the dollar is gaining all the attention considering its strength against emerging market and major currencies.Also, in the search for safe havens, investors have been choosing U.S. Treasuries especially recently with the United States and Mexico struck a trade deal, which places even more demand on the US dollar.Global trade war fears eased a little and as a result U.S. Treasury yields rose across all maturities to weekly highs, which was after the U.S. Mexico reached their agreement on an overhaul of the North American Free Trade Agreement (NAFTA).The rise in treasuries wasn’t significant but they rose nonetheless, and this impacted on gold prices.Often purchased as a hedge against geopolitical risk, gold is highly sensitive to rising yields, because it pays no yield, yet costs to insure and store.The reality is that the NAFTA is minor compared to the current main trade dispute between the U.S. and China.

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This post was written by Graeme Watkins

CEO Valutrades Limited, Graeme Watkins is an FX and CFD market veteran with more than 10 years experience. Key roles include management, senior systems and controls, sales, project management and operations. Graeme has help significant roles for both brokerages and technology platforms.