XAU/USD Daily Signals – August 31, 2017

Gold Continues to Decline

What’s in the News?

With response to the geopolitical rigidity the gold investors are taking pleasure from the recent rise in price. The overall price and responsiveness of gold appears feeble than would have been expected from the historically based models and for understandable reasons. Due to cryptocurrencies, the influence of unconventional monetary policy and the growth of markets have dissolved the rigidity of the precious metal.

The extended activity of unconventional measures by central bank has helped significantly to disassociate the asset prices from underlying radical. During such circumstances, the historically based models will tend to overrate the reaction of asset prices to boost the geopolitical rigidity which includes the decline in assets such as equities.

The failure to raise the debt ceiling will cause a government collapse and would cut off $6.5 billion from the economy. “A disruption in government spending means no government paychecks to spend at the mall, lost business and revenue to private contractors, lost sales at retail shops, particularly those that circle now-closed national parks, and less tax revenue for Uncle Sam,” said Beth Ann Bovino, chief economist at S&P Global Ratings.

She also mentioned that “With markets somewhat jittery about a possible selective default of the U.S. sovereign, worries of a shutdown threat only adds to their concerns.” The combination of shutdown and the emerging debt ceiling can affect business, consumer sentiment and the overall economy.

The U.S Government transcended the old debt ceiling several months ago. The Treasury Department has been planning a number of schemes to keep the government running.

What do the Charts Say?

Intraday bias in XAU/USD remains bearish with 1308.9 resistances intact. A deeper decline is still expected for the pair as long as resistances holds the area. The pair’s price action stays below resistances so far at this point. The pair is rejected at trend line around this area. Now, we view this as correction and to the downward bias. Thus, we’d expect resistance. Intraday bias remains bearish with a break of 1307.22 indicating near term bearish reversal has taken place. This will the turn outlook to continue with downside bias and oscillator staying below 50.0 levels. There is clear indication of trend reversal shifting the momentum. The current development suggests that the medium term downside is expected to be further low and focus shall be at 1291.4. The pair breaking here should make lower lows of levels. However, we shall stay cautious of the price action movement at the 50EMA. The price has been bounced of recently. We keep looking for a break below the MA for confirmation.

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