Gold price continues to face selling pressure in today’s Asian session following the market’s excitement over a coronavirus vaccine yesterday. As of this writing, XAUUSD is down more than $7 from its opening price as it trades around $1,706.08. With news of China passing on more security measures for Hong Kong, will gold price’s safe haven status shine?
Today, Reuters reported that China may expand the scope of Hong Kong’s National Security bill to cover individuals as well as organizations. Earlier, it was only said that individuals who threatened national security would be punished through lawful measures. Trade unions in Hong Kong have already called for a strike today as the legislature is set to debate on a bill that would punish those that disrespected China’s national anthem.
Rising political tensions between China and Hong Kong could be negative for risk especially since US President Donald Trump has warned that the US would impose more sanction on China if it passed its National Security bill for Hong Kong. Should this happen, XAUUSD could trade higher because risk aversion would draw market flows into gold price’s safe haven status.
On the 4-hour time frame, it can be seen that gold price is testing support at the rising trendline (from connecting the lows of April 21, May 1, and May 7). This price, around $1,712.10, also coincides with the 200 SMA. There have been a couple of reversal candlesticks which could mean that an uptick on XAUUSD could soon be imminent.
A closer look at the 1-hour time frame suggests that any upward move on gold price could be limited around $1,725.00. This price coincides with the falling trendline (from connecting the highs of May 20 and May 26). Drawing the Fibonacci retracement tool from the high of May 26 to the low of May 27, it can also be seen that this price coincides with the 61.8% Fib level.
On the other hand, it’s worth pointing out that the gold price has recently been consolidating following its sharp drop. With this, a bearish flag chart pattern has formed. When you enroll in our free forex trading course, you will learn that this is considered a bearish continuation pattern. This means that a close below yesterday’s low at $1,708.30 could trigger a potential sell-off to $1,692.50 where XAUUSD bottomed on May 11.More content