Saad Ullah
Gold (XAU) shot up in Friday's early U.S. trading, with June futures leaping more than $31 as the yellow metal got a boost from a softening dollar and climbing oil prices.
XAU Picks Up Steam as Dollar Drops and Oil Climbs
Gold (XAU) prices bounced back nicely in early Friday trading, staging quite a comeback after getting hammered earlier in the week. June gold futures jumped $31.30 to hit $3,337.30, while silver for July delivery ticked up $0.138 to $32.755. Both precious metals caught a break thanks to friendly market conditions – a weaker dollar and higher oil prices both helped gold's cause. That said, the recent uptick in investor confidence and rising Treasury yields kept a lid on how high gold and silver could climb.
Stock markets across Asia and Europe were a mixed bag overnight, though mostly positive. Wall Street looked set for modest gains at the opening bell. Investors have been in a better mood this week following a fresh trade deal between the U.S. and UK, with all eyes now on crucial U.S.-China talks happening in Switzerland this weekend.
XAU Investors Wary Despite Trade Talk Optimism
David Morrison at Trade Nation shared some thoughts on the upcoming U.S.-China meeting: "While it is understood that these are preliminary discussions, investors are hoping that these negotiations will prove constructive and lead to a timely resumption in bilateral trade. But it's also worth noting that equities have bounced sharply off the lows hit a month ago. There's a lot of good news already priced in. It's also the case that it takes time to reach trade agreements and significant damage has already been done to global trade, with relations between the U.S. and China both frosty and uncertain. In other words, it wouldn't take much of a disappointment for investors to start reducing their exposure to equities."
The real-world impact of the U.S.-China trade war is becoming painfully obvious in shipping data. Bloomberg recently highlighted a massive one-third drop in imports coming through the Port of Los Angeles – North America's busiest container hub. Even worse, one shipping CEO told Bloomberg that shipments from China have nosedived by a whopping 60%.
In the weeks ahead, these shipping problems will likely cause a nasty domino effect across many U.S. sectors – hitting everyone from dock workers to truckers to retailers selling imported goods. We'll probably start seeing empty shelves in stores before long. And according to transportation experts, even if both countries shake hands on a deal tomorrow, it'll take quite some time to get supply chains back to normal.
Gold (XAU) Charts Show Bulls Still Have the Upper Hand
Looking at broader markets, the dollar index weakened Friday, giving a nice boost to dollar-priced commodities like gold. Oil futures pushed higher, with Nymex crude trading around $61.25 a barrel. The 10-year Treasury yield sat at 4.382%. No major economic reports were on the calendar for Friday.
From a technical standpoint, the bulls still have the edge in June gold futures. They're aiming to push prices above this week's peak of $3,448.20. Bears, meanwhile, want to drag prices below last week's bottom of $3,209.40.
XAU should hit resistance around $3,350.00, with the next hurdle at $3,400.00. Support sits at $3,300.00, followed by the overnight low of $3,278.90. On Wyckoff's scale, gold scores a pretty bullish 7.0 out of 10.
Silver bulls have a slight edge in the near term. They're looking to close above $34.015, while bears want to push prices under $31.00. First resistance is Thursday's high of $33.095, then this week's peak of $33.48. Support can be found at this week's low of $32.16, then at $32.00. Wyckoff rates silver at a moderate 5.5 out of 10.
XAU's Fate Tied to U.S.-China Talks and Dollar's Next Move
Gold (XAU) will likely react strongly to whatever comes out of the U.S.-China trade talks this weekend. Good news could actually hurt gold as investors might feel less need for safe havens, while disappointing results could send more money flowing into precious metals. And as always, which way the dollar heads will play a huge role in where gold prices end up.
Traders will be glued to next week's economic releases for any hints about the Fed's next moves, which could shake up precious metals in a big way. With inflation still a concern globally, gold continues to appeal to many as a traditional hedge against economic uncertainty and currency weakness.
Given the ongoing supply chain mess and simmering global tensions, gold's longer-term outlook seems pretty solid, even if we might see some short-term rollercoaster action as market sentiment shifts.
Saad Ullah
