Over the last few weeks, the gold price has formed a solid base around the $1,290 mark and has pushed up through $1,300 several times before hitting resistance and pulling back.
Gold will need something special to break out of the tight $15 dollar trading range we have witnessed recently and the upcoming G7 summit this weekend may be just what the precious metal needs to give it a kick-start.
Donald Trump recently announced new tariffs on steel and aluminum which includes the European Union and countries such as Canada which are known to be two of America’s staunchest allies.
The tariffs have created major conflict between the respective countries and fears are that a full-blown trade war may eventuate which makes this weekend’s talks all the more important.
If Trump does not back off some of the proposed tariffs, or fails to find common ground with his international partners gold may receive a big boost.
“Although global trade fears remain a dominant market theme, the yellow metal clearly needs a fresh catalyst to accelerate the flight to safety,” said Lukman Otunuga, research analyst at FXTM, in a note.
“This much-needed catalyst could come in the form of [U.S. President] Donald Trump if he creates chaos and uncertainty during the summit.” he added.
Next week’s interest rate decision on June 13 may also provide support for gold as a rate hike is already priced into the market and if the Fed proceed with caution in their following monetary statement the greenback will be sold off with gold being a major beneficiary.
“For all practical purposes, the June [U.S. Federal Reserve interest] rate hike is pretty much discounted and we suspect the dollar could sell off slightly once the Fed’s move is out of the way” said Edward Meir from t INTL FCStone
We don’t think the dollar rally will resume as aggressively going into June.” He added.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 58% of retail investor accounts lose money when trading CFDs with this broker. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Risk warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 58% of retail investor accounts lose money when trading CFDs with this broker. Before deciding to trade foreign exchange you should consider whether you understand how CFDs work, your investment objectives, your level of experience and readiness of taking risk. The possibility exists that you could sustain a loss of some or of all of your initial investments and therefore you should not risk more than you are prepared to lose. Please seek independent financial advice if necessary.
|By clicking "Continue" you will be redirected to the website operated by FIBO Group, LTD company registered in BVI and regulated by FSC. Please familiarize yourself with the Customer Agreement through the link. Click "Cancel" to remain on this page.|