On analysis of the moves of the gold futures in different time charts, I anticipate that the current reversal could only be a part of the next exhaustive candle on Monday as any attempt to cross the immediate resistance at $3395 will attach big bears to load fresh shorts with a stop loss at $3510.
Undoubtedly, the reasons for return of buying spree are not sufficient to remain bullish at this point when the gold has already lost its safe have potential due to availability of other safe havens like Swiss franc and Japanese Yen which are flexible and stable.
Currently, the worsening relations between the U.S. and China could take a new turn after Friday’s statement by U.S. President Donald Trump that China had violated an agreement with the U.S. to roll back tariffs and trade restrictions for critical minerals mutually and issued a new veiled threat to get tougher with Beijing.
Undoubtedly, Trump’s confrontations with long standing allies over trade and security, and his attacks on the Fed, have revived the issue in recent weeks and more mainstream voices have joined the debate over the safety of Germany’s gold reserves in New York for reasons dating back to the Cold War and the monetary system created in the wake of World War Two.
Today, Germany’s gold reserves are held at the Bundesbank headquarters in Frankfurt, in New York, and at the Bank of England in London, could be diversified back to Germany amid growing geo-political concerns as the Russia’s invasion of Ukraine, and the implicit threat it represents for the rest of the Europe, is likely to complicate Germany’s geopolitical calculus again.
After analyzing the steps taken by Germany in the past, before the arrival of Trump for the first time, the Bundesbank brought back 300 tonnes of gold from New York between 2014 and 2017, saying it wanted to “build confidence at home.
This time also, Budesbank, Central Bank of Germany, could repeat this action amid surging fear of global recession due to the extensive fear of stagflation after the implementation of tariff trade tussle since the beginning of Trump’s second term this year.
I anticipate that any such diversification of gold from the U.S. could shake the confidence of the gold bugs about the safe haven potential of the yellow metal, as the US dollar could regain strength once again if the Federal Reserve comes back with more interest rate cuts this year.
Disclaimer: Readers are advised to take any position in gold at their own risk as this analysis is based only on observations.