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The Daily Fix: Gold traders 360-degree playbook

Head of Research

25 Feb 2020

In last weeks ‘A gold trader’s 360-degree playbook’ we turned bullish on the yellow metal, favouring long positions on the break of the range highs of $1590. That call proved to be the right one, although, we are seeing signs of euphoria in various sentiment indicators and overbought conditions, resulting in consolidation after a strong run.

In this week’s gold video, we maintain a bullish bias on gold, potentially adding to longs priced in USD (XAUSD) on a move through $1660. While also seeing a compelling case to initiate longs in AUD-denominated gold (XAUAUD) on a daily close above 2500.

In the video above, I lay out the investment case, where on the political side we gear up for Super Tuesday (3 March), with expectations high that Bernie Sanders will do well here – gold is our clear hedge against political angst.

The coronavirus is causing major concerns, and just when the market feels comfortable that recovery rates are improving in China and business slowly comes back towards normal production, the threat of outbreaks in Germany, and the US grip markets – we are already seeing the number of cases in Italy, Korea and the Middle East increasing and stringent measures to contain the spread will impact economics here.

The market wants answers, but the circuit breaker, something markets crave in times of volatility and uncertainty, seems less obvious this time around. It seems that gold is used as a currency in its own right, but also acting as a hedge against economic fragility and expected central bank action – where traders sense monetary stimulus will do little to improve business and consumer sentiment should we see a clear shock to the system, which gold traders are seeing as a low but growing probability.

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