The imposition of additional, higher tarrifs on the Chinese products by the United States met with an immediate reaction from China, which yesterday announced that from June 1, customs duties on more than five thousand products originating in the USA will be in force. This triggered another wave of panic on the stock markets.
The scale of declines in US indices has not been observed since the last quarter of 2018, the Japanese yen and the Swiss franc also strengthened. On the other hand, rumors of a possible suspension of purchases of US government bonds by China or their sale weakened the US dollar. Such a significant increase in fear in the markets seems to have convinced investors to buy safe gold, which has gone up by over USD 15 yesterday. As a result, the price of gold returned to around 1300 USD per ounce.
It is worth noting that even the US Dollar is only slightly responsible for such a strong rise in the price of gold. To a greater extent, the increase resulted from direct purchases. Gold went up yesterday even in relation to currencies that were strongest, such as the Japanese yen or Swiss franc. This may indicate a strong demand resulting from investor concerns.
Chart: Gold, D1. Conotoxia trading platform.
Looking on the chart we can spot that the price has broken the upper limit in the downward channel. Within this channel the market has created a simple correction where its last wave has a length of 61,8% of its first wave. Yesterday's strong demand for gold may suggest that a new upward impulse has probably started. If this assumption is correct, then gold could even go to USD 1350 and be supported not only by high demand, but also by the possible weakness of the American currency.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal Opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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