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Gold Prices Oscillate as Risk-Appetite Improves, But Risks Are Not Gone

Gold prices
Gold prices

The volatility in gold prices (XAUUSD), has declined sharply in the last seven days and has instead shifted towards GBPUSD, EURUSD, and other dollar pairs as it appears that gold traders are digesting the last few month’s gains. Also, with the risk of a hard-Brexit being blocked via the Benn act, the need for traders to hedge against risk with gold has declined.

On Tuesday, UK MPs will vote on the new deal between the UK and EU and could cause the risk-premium in the British pound to decline, and thereby supporting gold demand. Rejection to the deal could boost gold prices as the UK would probably face a snap election with the Brexit Party grabbing seats from mainstream parties.

Gold prices could also receive a boost if the fragile trade deal between the US and China turns sour, triggering a down leg in stock market indices. In mid-November, it is anticipated that the new trade deal will be signed.

Investors are also worried about the state of the Euro area and the US economy, and on Thursday, the latest PMI indicators will be published. If the indicators remain soft, then that will further support gold prices. For now, the market is waiting for the next macroeconomic impulse to send the price lower or higher.

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Gold Prices Technical Outlook

Technically, the Gold prices are trading sideways around the $1486 level and seen from September 4; the price action is forming a wedge-like-pattern in an overall bullish trend.

As the overall trend is upwards in 2019, it would not surprise me if the price trades higher in the next few weeks, and a break to the October 3 high at $1519 will confirm the breakout from the wedge, and the resumption of the uptrend.

If the price indeed manages to establish itself above the $1519 level, the price might be able to reach the September 4 high of $1157, followed by the wedge patter target at $1580.24. However, until the price trades above the $1519 level, the short-term trend will remain downwards, and traders might short-sell gold prices in the 1506 to 1519 interval, with targets at the October 11 low at $1473.96.