10:22, 15 January

Stuck at Resistance at $1300 as China Disappoints

In the last week or so gold has met stiff resistance at the current key level of $1300, after enjoying a healthy surge higher. This push higher saw gold move to a six month high just shy of $1300 after enjoying some solid support from the key $1240 level and the $1200 level before that. For a couple of weeks before the push higher gold consolidated a little resting on support at $1240 after making a strong rally back towards this level, which had become significant when it offered reasonable resistance halting its climb a couple of months ago.
After struggling with the resistance level at the $1240 level for several weeks, it fell back to another key level of $1200 where it bounced off strongly. The $1240 level provided some support in July and more recently pushed gold lower in October, so it is significant that it has now broken higher. The market will now be watching the $1300 level as this level was significant earlier last year.

For the most part through October and November last year gold had made a home in between two key levels of $1200 and $1240, and the markets were watching closely to see which way the next big move might be. Gold has received both support and resistance from the $1200 level in the last few months and didn’t appear to be in any rush to move too far away. The $1240 level was significant several months ago when gold received some short-term support there and subsequent resistance.

After falling for several years up until the end of 2015, which saw it fall from its all-time highs down to around $1050, gold has done well in the last few years to regain some of those losses. It had climbed back above $1300 on several occasions since then and generally in the last 15 months it had been steadily climbing higher from around $1100, currently looking to return back above the $1300 level.

In December, Chinese exports fell by their most in two years, coupled with a significant contraction in imports, which impacted stock markets negatively and raised fears of a sharper slowdown in global growth. The further weakening in the world's second-largest economy encouraged investors to seek safety in the precious metal. The weak Chinese data and struggling equity markets suggest that these conditions could linger or get worse during the year. Two other major factors supporting gold recently have been the concerns over the impending vote on Britain's exit from the European Union and a prolonged partial government shutdown in the United States. The U.S. government shutdown and the subsequent slowdown in the United States economy puts the spotlight back on the U.S. Federal Reserve and their plan for 2019 with regards to interest rates. Last week gold was propped up by Fed Chairman Jerome Powell, who downplayed suggestions that interest rates would be raised twice more this year, and reaffirmed that the central bank could remain patient on monetary policy. Gold prices have behaved as you would expect during the recent period of uncertainty, rising as expectations of Fed tightening next year have been cut sharply and equities have sold off.