Last week, gold extended it gains and continued to hike consistently higher amid further disappointments in the US fundamental result releases. The week saw not only contractions in the US Core Durable Goods Orders and Factory Orders figures, but also a widening Trade Gap and a spike in the Unemployment Rate.
Further buoying the pair were the new fears surrounding UK Property Funds which are taking drastic measures in order to stay afloat. Consequently, developments in this UK Property Fund saga will likely be the news to watch this week.
Gold continued to go from strength to strength and distance itself from the ranging phase which dominated the metal for so many months. Now moving to challenge the 1400.00 level, the commodity relied on last week’s poor US results and the ongoing fears towards UK Property Funds to fuel its climb.
Specifically, a large degree of momentum was supplied by the 0.3% and 1.0% contractions in the US Core Durable Goods and Factory Orders figures. However, a widening of the US Trade gap to -41.1B also contributed to the metal’s bullish week.
Looking to the technical analysis, gold’s bullish trend is showing little sign of slowing despite the strong evidence that the metal is overbought. Both the Stochastics and RSI are firmly in overbought territory which casts some doubt on the sustainability of the protracted rally.
However, contrary to this, the daily EMA’s are exceedingly bullish which should make another week of gains all the more likely. Furthermore, a quick look at the Parabolic SAR reading shows that the uptrend is well and truly underway.
Going ahead, whilst US results will play their usual role in impacting gold prices, the fears being generated by the ongoing troubles surrounding UK Property Funds will be the news to watch.
The recent spate of suspensions in trading and liquidity concerns has gone a long way in seeing capital flood back into the safe haven investment. As a result, any further suspensions could continue to see the metal rally and challenge resistance strongly.
Ultimately, gold’s current bullishness could see the commodity move back to prices which have not been seen since 2013. As usual however, the metal’s performance will be largely contingent on fear and uncertainty running rampant in the market.
Currently, VIX readings are trending lower which might bring into question just how high gold can continue to push. This being said, the very real concerns being raised as a result of the trading suspensions in the UK Property Fund Market are likely to keep the metal afloat in the medium term.