Gold becomes more attractive

12 April, 2017

It seems almost surreal that another war might be on the horizon for the United states, but that could be very much be the case in the near future. Markets are responding as a result and risk hedging has been the main theme thus far and this can be seen on a variety of markets. Despite all of this the US economy continues to do well, and there is no uncertainty around the fact that it will likely improve at the present rate with the recent FED vote being realised showing that 9 out of 12 voted to push interest rates higher. This points to many members of the Federal Reserve realising that the US economy is likely to continue to grow and that inflation is likely to be a problem in the near term. However markets have been risk adverse as mentioned above.

 Looking at the current state it's clear to see that gold is being used as a hedge against another war that the US may look to enter. The recent rise today was one of the strongest movements we have seen since Trump become president, and for the traders this is a very strong sign that there is still a need for a commodity like gold as it climbs the charts. At present there is a bearish trend line which has been around since July and the market is looking to push higher and treat it as dynamic resistance at this stage. However, it would likely require more sabre rattling from the Trump camp in the near future, otherwise the market could become more rational and look to push lower.

From a technical stand point support at 1263.39 and 1241.23 is likely to be very strong at this stage. While resistance is likely to be found around 1290 if the market decided to be aggressive and rise higher. The 20 day moving average is also worth watching as it continues to provide dynamic support in the case of brief pull backs and should be treated with respect by traders who are acting bullish.

Oil markets continue to lift higher as OPEC looks to follow through and cut production in the long term in an effort to boost prices. This has so far been received moderately and the price effects have not flowed though. However the US economy finds itself using more and more oil in the lead up to summer and this is having a strong long term effect.

Thus far oil has moved up the charts, but has failed to crack through the long term bullish trend line from previously. There is also a bearish trend line which has been in motion since December that the market is also focused on, so it would be interesting to see the outcome of these movements and if they have a large impact. I would expect a continuous drawdown, but how fast is another thing.

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