The gold futures rallied 3.6% in the last four trading sessions to USD1322.7 (highest level in nine weeks) as market participants looked for safe-haven asset amid worries that the US-Chinese persistent stand-off and Washington’s threat of tariffs on Mexico would hurt the global economy. Following the downtrend channel breakout (daily) and long term bullish triangle breakout (monthly), gold futures are likely to trend higher in the mid to long term towards USD1350-1400 levels. For direct proxy to the surging gold prices, traders can track the SPDR Gold Shares (Figure #3 - NYSE:GLD) or Bahvest Resources (Figure #4 - BAHVEST: 0098).

Several negative developments adding to the trade worries. Relations between the US-China got another jolt when the two nations clashed again at the Shangri-La Dialogue in Singapore on Sunday. Adding to woes, factory activity contracted across the US, Asia and Europe last month on fears of intensifying global economic downturn and there are growing noises now that the Fed is going to cut as much as 50 bps by the end of 2019. Yesterday, St. Louis Fed’s president James Bullard (a voting member) said a rate cut “may be warranted soon” given the elevated risks to economic Growth.

Recent bullish downtrend resistance breakouts in daily and monthly charts bode well for well for further recovery. Since hitting a low of USD1161 (16 Aug 2018), gold prices have been trending higher above the support trend line (near USD1280) to end at USD1322. The recent bullish downtrend resistance breakouts in daily and monthly charts bode well for well for further recovery to immediate target at USD1344 (20 Feb 2019). A strong breakout above this level will spur prices towards USD1375-1400 levels. Supports are situated at USD1280-1300 zones.

Source: Hong Leong Investment Bank Research - 4 Jun 2019