After the bullish start of the year, the rand has started to weaken since the last Thursday. Let’s point out the main factors affecting the ZAR and set the key levels for this week’s trading.
Whether gold rally is so obvious?
Gold managed to rise today after three days of a significant plunge. In the late Sunday evening, China announced charges on 128 US goods in retaliation to US steel and aluminum tariffs. Charges are in force since today. Trade wars’ tensions increased so the US dollar has continued to weaken giving a green light to gold.
However, gold is suffering from the volatility since the end of January. So does it have real reasons to rise further?
According to Goldman Sachs’s analysts, gold has chances to outperform in the next months. There will be two supportive factors for bullion. They are an inflation’s increase and a high risk of stock market’s correction.
It may seem counterintuitive but interest rate hike may be a supportive factor for the gold market. Despite the fact, that rate’s hikes should help to lift the US dollar, Goldman Sachs has another opinion. As the company considered empirical data, gold has surged after rate hikes four from six times. The Fed is anticipated to raise the interest rate at least two times this year.
The unstable trade environment is supposed to bring uncertainty to U.S. equity markets which could drive money into safe haven assets like gold and the Japanese yen. Although there were talks about US-China negotiations in regard to trade wars, in fact, we see an escalation of the trade conflict.
According to Commerzbank, gold represents not only as a safe haven but as a crisis currency too.
Nowadays, there is a big conflict between Russia and the West that exploded because of the poison attack on a former Russian spy. Until the conflict escalates, gold gets points to rise.
As we can see, gold has chances to gain a foothold and move further as the uncertain environment is highly supporting it.
However, investors will pay high attention to US data this week. ISM non-manufacturing PMI (April 4, 17:00 MT time), average hourly earnings, non-farm payrolls, unemployment rate (April 6, 15:30). If data is encouraging, the US dollar will appreciate, that can slow down the rise of yellow metal.
Now gold is trading near 1,339 an ounce. The resistance lies at 1,341.50. If gold is able to break it, more likely that the Goldman Sachs’s forecast will become a reality.
If we look at the daily charts of the US dollar index and the USD/JPY pair, we will see a misleading trend.
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