Gold price continues retreating from year-to-date highs
Gold price pulls back from its yearly high as global banking jitters pass (for now) and US Treasury yields find a floor, supporting a stronger US Dollar. The precious metal trades at $1,966 at the time of writing as it continues to consolidate within a technical uptrend. The dust settles after the latest casualty of the current neo-financial crisis, Credit Suisse was swallowed up by rival UBS on Monday, and Gold – the safe-haven par excellence – loses the upside momentum that propelled it to YTD highs above $2,000. In the United States, treasury staff are looking at ways for regulators to insure more than the current Federal Deposit Insurance Cap (FDIC) of $250,000 for bank deposits, to increase confidence in the banking system, according to a report by Bloomberg News on Monday.
This adds to all the support already provided by authorities, estimated at half the cost of the 2008 financial crisis bailout and provides further evidence to reassure investors that authorities are willing to step in to save the day. From a technical perspective Gold price remains in an uptrend both on the short and medium timeframe. It has been ascending in a steep channel but now appears to be pulling back down after peaking on Monday.
The Average Directional Indicator (ADX) on the 4-hour chart is at 55, which is a very high reading. ADX measures how strongly an asset’s price is trending and when it reaches above 50 it is often a sign the trend is close to exhaustion. Given the high reading was accompanied by a two bar reversal pattern from Monday’s highs and a steady decay since, it may be a sign Gold price could pull back further, probably to the base of the channel in the $1,960 region. Overall the trend is bullish, however, suggesting that once it has finished its correction it will probably continue rising. It could require a decisive break and close below the lower channel line to indicate a deeper correction or reversal of the uptrend was taking place.
The Average Directional Indicator (ADX) on the 4-hour chart is at 55, which is a very high reading. ADX measures how strongly an asset’s price is trending and when it reaches above 50 it is often a sign the trend is close to exhaustion. Given the high reading was accompanied by a two bar reversal pattern from Monday’s highs and a steady decay since, it may be a sign Gold price could pull back further, probably to the base of the channel in the $1,960 region. Overall the trend is bullish, however, suggesting that once it has finished its correction it will probably continue rising. It could require a decisive break and close below the lower channel line to indicate a deeper correction or reversal of the uptrend was taking place.