By Fast Brokers – Gold nearly tested $1225/oz during the Asia trading session as investors divested from the risk trade amid rising uncertainty concerning a slowdown in China. China’s manufacturing PMI printed below analyst expectations and property sales declined by 70% in coastal cities month over month. Li Daokui, a member of China’s central bank policy committee, suggested that China’s property bubble could be worse than America’s due to the possibility of social unrest. For further analysis on this topic, you can read my blog post last week ‘Year of the Tiger’ at www.blogs.fastbrokers.com/matthew. Since China has been a driving force in the global economic recovery, the concept of a slowdown in China favors safe haven assets, such as gold. Meanwhile, the ECB warned that EU banks could write down another $240 billion in losses due to adverse economic conditions. The combination of negative news from China and the EU has given gold a boost and if the trend continues the precious metal could soon be testing May highs. Meanwhile, investors will be looking to see how U.S. manufacturing fared last month and whether U.S. equities can avoid a large selloff even though futures are in the red right now.
Technically speaking, gold faces technical barriers in the form of intraday and 5/18 highs. Additionally, the psychological $1250/oz level should serve as a solid technical barrier should it be reached. As for the downside, gold has multiple uptrend lines serving as technical cushions along with 5/25 and 5/21 lows. Furthermore, the psychological $1200/oz area now becomes a technical cushion.
Present Price: $1220.00/ oz
Resistances: $1222.00/oz, $1224.54/oz, $1226.80/oz, $1229.56/oz, $1232.22/oz
Supports: $1219.16/oz, $1217.10/oz, $1210.36/oz, $1208.18/oz, $1205.26/oz.
Psychological: $1200/oz, $1250/oz
(click chart to enlarge)
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