Spot gold prices made headway today as concerns over China’s property sector debt and upcoming central bank actions took center stage. The price of gold, denoted as XAU/USD, is challenging the $1,930 level once again, signaling potential momentum in either direction.
China’s property market is experiencing continued turbulence, with Country Garden seeking to renegotiate its debt obligations for its CNY bonds. Additionally, the wealth management unit of Evergrande, a prominent Chinese property developer, faced further difficulties as some staff members were detained by the police. As a result, Chinese companies listed on the Hang Seng Index (HSI) in Hong Kong fell by more than 1%, contributing to risk aversion in the market.
While Japan is on a holiday, Nikkei 225 futures saw some gains, with the Yen trading near its lowest level since November last year. Other currencies had a relatively quiet start to the week after the US Dollar showed gains against CHF, EUR, GBP, and JPY last week.
The focus of the market this week lies on central bank meetings. The Federal Reserve and the Bank of Japan are expected to maintain their current monetary policies on Wednesday and Friday, respectively. The Bank of England, however, is anticipated to raise interest rates by 25 basis points on Wednesday.
In terms of technical analysis, spot gold has been trading within a range of $1,885 to $1,997 over the past four months. A breakthrough on either side of this range could act as a catalyst for a momentum shift in that direction. Support for the price of gold may be found around the 1885-1895 area, where previous lows, a breakpoint, and the 38.2% Fibonacci Retracement level are located. On the upside, resistance may be encountered at recent peaks of 1953 and 1987, or at the psychological level of 2000.
Overall, market participants are closely monitoring the developments in China’s property sector and the outcomes of the upcoming central bank meetings to assess the potential impact on spot gold prices.
– Daniel McCarthy, strategist for DailyFX.com