Gold retraced while equities and indices had a strong rebound at the Asian open this morning, as North Korea refrained from launching a missile on Saturday and Hurricane Irma made landfall in Florida without catastrophic damage on Sunday.

These two major events which had undermined market sentiment last week have shown signs of moderation, resulting in a relief rebound in risk assets. 

Two once-in-a-century hurricanes landing in America’s coastal area this month are expected to cost billions of dollars across business activity, insurance and rebuild. Federal Reserve Bank of New York President Dudley said the hurricanes in the third quarter could temporarily influence the timing of the next interest rate hike, although above-trend growth does warrant continued gradual rate hikes. He also addressed the matter that the storms are unlikely to affect the balance-sheet normalisation, which is expected to happen ‘relatively soon’. 

The dollar index fell to as low as 91.0 – a level not seen since January 15 - before bouncing back to the 91.5 area this morning. The overall trend remains bearish with its 10-day moving average and SuperTrend (10,2) both trending down. 
Market participants will need to strike the right balance when assessing the impact of extreme weather on the economy against a technically oversold dollar. 

As the dollar strengthened, the gold price retraced to around the US$1,336 area - a previous key resistance level (100% Fibonacci extension). Once a resistance level is broken, it becomes an immediate support level. Similarly, silver’s price has fallen to the US$17.76 area, which is a 100% Fibonacci extension level. In the near term, gold and silver prices could find some support at US$1,336 and US$17.76 respectively. 

Technical Analysis:

Gold

  • Retraced back to the 100% Fibonacci Extension level of US$1,336, which has become a support level
  • 10-Day Simple Moving Average sloped upwards
  • SuperTrend (10,1.5) remains in bullish set-up, suggesting an uptrend is intact
  • The next resistance level could be found at the US$1,369 area


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