Although risk sentiment has improved because of phase 1 trade deal between US and China and Brexit uncertainty has become clearer, time to erase these risk off the table will remain long and there will be a lot of obstacle along the way.
- Phase 1 deal is just agriculture stuff. Phase 2 is intellectual property which is much harder to reach a deal. Trump might slap several tariff before this phase 2 deal become more real. A birght spot in this deal is currency pact which might state that China cannot devalue currency at will. If this is true, China might have less ammunition agaisnt US if Trump decide to slap more tariff. Furthermore, will China satisfy with phase 1 only ? Will they stall? Or Trump satisfy with phase 1 in the time being to plan more attack to China? I m seriously doubt the whole deal will be reached in this year.
- Brexit deal next week is unlikely. Best I would think there will be an extension letter from PM Boris Johnson. GBP strength might fade away and come to a correction mid week.
- Last but not least, even without trade dispute and Brexit, global growth slowed down and recession became more visible. QE and rate cut have made money cheap which will urge investors to flock to gold for shelter.
In short, short-term downside for gold but target might not be that wide. Downward channel is still in play. I m looking for re-short at 1,497 -1,501 maybe on Tuesday ( Monday has a lot of bank holiday)
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Touch the considering zone, look for bearish confirmation at H4