Shorts Preferred For Gold On Reduced Attractiveness For Safe-Havens

On Friday, gold prices hovered near two-week lows around $1332.12 on a stronger dollar and soaring Asian shares, which pushed investors away from safe-haven assets including gold and Japanese yen, into riskier instruments. The commodity was set for the first weekly decline since May.

According to the data released on Friday (15/7) from the National Bureau of Statistics China, China’s economy grew 6.7% in the second quarter compared to a year earlier, matching the data from the first quarter and slightly better than the estimates of 6.6%. Moreover, industrial production also rose by 6.2% in June on a yearly basis from 6% in May, beating economists’ forecasts of a 5.9% growth rate. The positive data boosted Asian stocks to the highest level in 8 months, helping alleviate fears of slowing momentum.

The US Producer Price Index (PPI), measuring the changes in the price of finished goods and services sold by producers, recorded its biggest gain in a year thanks to the increase in the cost for energy products and services. According to the Labor Department on Thursday, the producer price index added 0.5% in June, the strongest increase since May 2015, after witnessing a 0.4% advance the month before.

The number of people filling for unemployment benefits in the US last week stood at the lowest level since the middle of April, which provides further evidence of a strong labor market. In particular,jobless claims remained stable at 254,000 in the week ended July 9, surprisingly beating market prediction of 263,000.

The market is keeping its eyes focused on the US Retail Sales report to be released later today. The total value of sales at the retail level is anticipated to rise 0.1% in June after rising 0.5% in May. Gold prices are under pressure for now and if the sales figure is better than expected, the commodity might continue to slide further.

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Fig. GOLD D1 Technical Chart

Gold price has retreated from the resistance area of 1375.82, the highest level in nearly 3 years, and is currently trading around 1332.12. RSI is lingering at 55 and pointing downwards. ADX is staying at 24.19, combined with the –DI heading downwards, suggesting that the buying power is getting weaker. The price has broken through the 10-day moving average from above, signaling further bearishness. Gold is anticipated to test the support level at around 1303.43. After that, a bounce-back could occur.

Trade suggestion

Sell stop at 1333.85, Stop loss at 1344.35, Take profit at 1322.82

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