Gold jumps to 14-month high as global tensions rise
Gold jumped to a 14-month high fueled by weaker Chinese economic data and Middle East tensions. Earlier today, China released weak economic data that showed that the trade war was biting. In May, the fixed asset investment rose by 5.6%, which was lower than the expected 6.1%. The industrial production rose by 5.0%, which was lower than the expected 5.4%. On the upside, retail sales rose by 8.6%, which was higher than the expected 8.0%. The unemployment rate remained unchanged at 5.0%. In addition, gold has been boosted by the expected rate cut by the Federal Reserve.
The price of crude oil remained unchanged as investors continued to worry about safety issues in the Middle East. Yesterday, two tankers were attacked at the Strait of Hormuz, where a third of all oil supplies shipped by sea pass through. In a statement, the US State Department blamed Iran for the multiple attacks. Iran swiftly denied the allegations and placed the blame on Washington and its allies like Israel and Saudi Arabia. Today, tanker companies sounded an alarm about the danger to seaborne oil supplies from the Middle East.
The US dollar strengthened after mixed retail sales data. In May, the headline CPI rose by 0.5%, which was higher than the previous 0.3% but lower than the consensus estimate of 0.7%. The core retail sales remained unchanged at 0.5%. Retail sales of gas and autos rose by 0.5% which was higher than the expected 0.4%. The retail control rose by 0.5%, which was higher than the expected 0.4%.
The XAU/USD pair rose to a high of 1360, which was the highest level in 14 months. On the hourly chart, the price is above the 14-day and 7-day moving averages. The RSI continues to remain above the overbought level of 70 while the accumulation/distribution indicator has continued to rise. The momentum indicator too has continued to rise. The pair will likely continue to rise to possibly test the important resistance of 1400.
The price of crude oil was relatively unmoved as investors continued to focus on the crisis in the Middle East. On the hourly chart, the pair has been forming a symmetrical triangle, which is a sign of consolidation. The accumulation/distribution indicator has been declining, reaching the lowest level in months. In the near term, the pair could breakout in either direction depending on what happens in the Middle East.
The EUR/USD pair declined below the important 61.8% Fibonacci Retracement level of 1.1256. The pair is trading at 1.1250, which is the lowest level since June 7. On the hourly chart below, the price is along the lower line of the Bollinger Bands. The RSI has dropped from a high of 50 to the current 25. The pair will likely continue moving lower to test the 50% Fibonacci level of 1.1230.