The risk aversion could continue into the beginning of the new week session pushing the gold to 1392$ before easing back again to 1380$ area following Crimea controversial referendum which weighed down on the market sentiment by the end of last week.
The gold have been actually well-supported in the recent few weeks to reach the current levels on the worries about the tension developments in Ukraine which can be the most threat to the European stability since the end of the cold war, despite its small economy.
The ECB president Mario draghi has mentioned this same meaning recently when he talked about this crisis following the ECB’s decision to maintain its interest rate at 0.25% saying that EU is not closely tied to Ukraine and it is early to talk about the long term impact of this crisis. So, there is no strong contagion threat currently however the geopolitical risks because of the Ukrainian situation could become substantial while the Ukrainian crisis impact on the Russian economy is actually sever.
From another side, it has become concluded now to most of the market participants that we are to have by God’s will, no pause of the Fed’s pace of incremental gradual QE tapering with harmonized agreement about it running currently among the Fed’s governors who have not found in the bad whether impact on the labor market an excuse to stop tapering last meeting after December labor report has shown adding only 74k of jobs out of the farming sector while the next reports to it have shown improving by adding 129k in Feb and 175k in March consecutively.
So, the markets are mostly pricing now on ending of the Fed’s QE by the end of this year and starting of interest rate hiking in the first quarter of 2015 and the gold is also pricing currently on that, after its collapse last year by this way which has not been seen since 1981 on the worries about the beginning of Fed’s tapering which has started to be materialized to the markets by the end of it by a gradual way calmed the golden metal holders fear and encouraged other to buy it after its 28% collapse last year which has been staved off over its crucial supporting level at 1180$ per ounce.
The markets have seen persisting of the risk aversion by the end of the last week drove the global equities indexes and their ETFs based down ahead of this referendum which is expected to be followed by economic sanctions against Russia by EU and US.
Overall, there was no deep loses in the beginning of the week but also there is no clear sign of rebound in the equities markets. The future rate of the Dow Jones is still currently in the red territory referring to opening below 16000 psychological level while Nikkei 225 index is trading currently in the negative territory but Shanghai could rebound trading over 2000 level following PBOC’s waited decision to widen the daily trading bands of the Yuan by 2% from 1%.
The Yuan movements in the recent days have been closely watched by the market participants as it looked pressed down by PBOC’s interventions against the speculations of higher Yuan value while the Chinese economic performance is still worrying the markets with instability of the Chinese money market and growing expectations of watching GDP growth rate below 7.5% this year while higher value of the Yuan can tackle the Chinese exports which fuel its GDP.
From the other side this action can be considered positive for Yuan as more taken reserve currency has a bullish outlook traded much more freely in the markets and what has happened following widening the trading bands of it in April 2012 from 0.5% to 1% tells that it has actually rose at the end despite the volatility which came with that decision which is expected to be repeated with these new wider bands which can encourage too directing more capital inflows to China by God’s will.
The gold which could penetrate its 23.6% Fibonacci retracement of its falling from 1920$ to 1180$ at 1354$ gaining momentum to reach 1392$ per ounce in the beginning of the Asian session can meet now in the case of rising further psychological resistance at 1400$ before 1433$ which has been reached on previous worries about imposing US military action against the Syrian regime fueled the energy prices while going down again from here can be met by supporting levels at 1363$, 1327, 1318$ before 1307$ which has been formed following getting over its 4h 200 moving average and it can be followed by 1300$ psychological level while there are below it other standing supporting levels have been formed in its way to rebound to the current level at 1283$, 1231$, 1218$ before 1200$ psychological level which can be followed by its lowest level of last year at 1180$ which could hold supporting it again at the end of it to rebound from 1182$.