Global Macro Strategist
Instrument: XAUUSD
Price Target: $1,275/oz, then $1,292/oz and $1,298/oz.
Market Price: $1,255.48/oz
We are in a temporary window where sentiment seems to be risk-on, with the dollar weaker and we're getting a technical bounce from all the trade tariffs and trade wars fog. Gold has corrected smartly from its $1,300/oz break of a few weeks ago (at which point I was bearish) to bounce smartly off its 200-week average of $1,235/oz.
It looks like we could get an easy leg to $1,275 / $1,300/oz, with the downside supported at the $1,250/oz to $1,235/oz range.
Entry: $1,255.48/oz
Stop: $1,250/oz and $1,235/oz.
Target: $1,275/oz, then $1,292/oz and $1,298/oz.
Time Horizon: short-term
UPDATE to the trade view originally posted on 10.07.2018: Following the poor price action by precious metals last week, with an inability to catch a bid despite S&P futures selling off over 1% in the Asia morning and US yields being very tight, we close out our initial short-term bullish stance, that was originally placed on the basis of the technicals looking constructive and the sell-off overdone.
The strength of the US dollar continues to overwhelm any near-term agenda in the markets and if we see a break of $1,235/oz of gold (200-day moving average) we may have to head to $1,200/oz for a retest.
Position is circa 1x capital, so for the Macro Monday book that's circa $10m. The key risk is obviously USD strength returning much sooner than anticipated, resolution of trade wars and US bond yields spiking higher. A sustained break sub $1,235/oz would suggest that our timing on this tactical gold long is wrong.
Trading plan
Looking for a gold move up to circa $1,275/oz to take off half the position and leave the remaining 50% to be taken off at $1,292/oz and $1,298/oz. Whilst we may potentially be looking to add at $1,235/oz, the most important thing is to keep track of the near-term sentiment on the USD. This is very much a technical bounce play.
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As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
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