As reported yesterday, gold price traded lower despite rising tensions between China and the city-state. This was triggered when Chinese lawmakers proposed a bill that would make citizens and organizations in Hong Kong, who are a threat to national security, punishable by law.
In the past, news of tensions in Hong Kong triggered risk aversion and highlighted gold’s safe haven status. Interestingly, these recent developments have not been bullish for gold price. At least, not yet.
Later today, it is expected that the Chinese parliament would pass the bill into law. Maybe then investors will start to worry and seek gold price’s safe haven credibility.
On the 4-hour time frame, gold price can be seen trading at a crossroads–quite literally, between two trendlines. By connecting the highs of April 14, April 23, and May 8, the falling trendline extends to $1,699.00. This price also corresponds to the rising trendline when you connect the lows of April 21, May 1, and May 6. A bullish candlestick chart pattern has already formed which many technicians interpret as a bullish confirmation signal. If there are enough buyers in the market, we could soon see gold price rally to its May 18 highs at $1,765.70.
It’s also worth pointing out that XAUUSD has recently made higher lows after a series of lower lows. Consequently, an inverse head and shoulders chart pattern has formed. This is widely considered as a bullish reversal indicator which supports the bias outlined above.
On the other hand, it’s worth pointing out that gold price is also currently testing the 200 SMA. If sellers are the ones dominating the market, XAUUSD could fall to its May 1 lows at $1,699.80.More content