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Gold Back From Highs Since April 2013, Trade War, Dollar-Yuan Catalysts

Mauricio Carrillo

China is ready to get back to the table.

Happy Monday FX Emperor, are you sure do you want to get back to markets after Friday meltdown? Well, you are a survivor if you are here. Let’s talk about gold, metals, and its catalysts.

Today, the sentiment rollercoaster remains alive. Gold and silver opened the week with substantial gains amid risk aversion after Friday trade war escalation and a Dollar-Yuan which jumped to 7.1535, its highest level since February 2018.

Then, US President Trump affirmed that China and the United States are ready to get back to the table and to negotiate for a trade war resolution. Trump said that both countries would start talking very seriously following a phone call on Sunday.

“China called last night our top trade people and said ‘let’s get back to the table’ so we will be getting back to the table, and I think they want to do something,” Trump said. “They have been hurt very badly but they understand this is the right thing to do and I have great respect for it. This is a very positive development for the world.”

Trump even tweeted on Monday about China and his great leader Xi. “Great respect for the fact that President Xi & his Representatives want ‘calm resolution.’ So impressed that they are willing to come out & state the facts so accurately. This is why he is a great leader & representing a great country. Talks are continuing!”

Meanwhile, USD/CNY jumped to new highs.

USDCNY 1-hour chart August 26

Gold jumps to fresh highs since April, but it retraces on improved risk sentiment

Gold is opening the week with a positive note; however, the unit has lost almost all its opening gains performed in a weekly bullish gap, and it is now trading virtually flat on the day.

XAUUSD 1-hour chart August 26

Previously in the day, XAU/USD jumped as investors were worried about the trade war and risk aversion was ruling the market. However, positive news coming from the G7 in the mouth of US President Donald Trump saying that China and the United States are ready to get back to the table to talk about the trade war brings the risk appetite to the market.

The news helped to improve sentiment after the Friday trade war escalation.

Then, gold started to move back from 1,555, a new high since April 2013, to trade at 1,525 in the early American morning. Currently, XAU/USD is trading at 1,530, which is 0.25% positive on the day.

Gold is trading backed on fundamental news, technical studies are limited due to the current global situation, and all the moves are clearly risk aversion/appetite, and US bond yields influenced.

That being said, technical conditions still shows more bearish extension possible; however, a bullish u-turn is on the cards in the short term. As for now, 1,525 is the new support on the house.

Below there, 1,510 and 1,490 are the levels to watch. Then, 1,480 is the middle term support.

To the upside, 1,445 is the immediate resistance; then, the unit will face the 1,555 high again. All that gold needs is to maintain prices above the 1,500 area.

This article was originally posted on FX Empire