Apart from the fundamentals that indicate the global economy, in general, and China and the U.S, in particular, might be showing signs of resurgence after over a year of “government stimulation,” the last 24 hours of trading has damaged the near-term technical condition of spot gold prices and the SPDR Gold Shares (NYSE: GLD). Yesterday, gold reversed from early morning strength as prices sliced beneath an important 5-week uptrendline (at approx. $1109). The weakness beneath the trendline sustained throughout overnight trading, leaving spot gold prices vulnerable to additional weakness that will likely press towards a test of the prior upside pivot low at $1088.10 on Feb 25 – which must contain the pressure to avert a plunge that revisits the Feb 5 low at $1043.80. Let’s notice that the action in gold is occurring despite relative stability in the Dollar Index (DXY), rather than in reaction to a stronger greenback. Once again, this divergent action reminds us that the behavior of gold so often now is disconnected from the directional moves of the DXY, and more a function of the behavior of a risk-asset class beholden to momentum swings (read: “hot directional money flows”) as well as to global macro fundamentals (read: China). Be that as it may, gold prices must claw back above $1116 to neutralize yesterday’s technical damage.
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