Gold turned back from the low of $1,742 on Monday with a high of $1,765.40 per ounce, being traded in a bullish range of $1,745 to $1,780 per ounce.
With the worldwide equities selloff, as well as China’s risk-off trade worries, the yellow precious metal has been demonstrating its value as a safe haven asset for investment mitigation.
“Gold truly acted as a safe haven asset today. Equities worldwide incurred a tremendously deep selloff as concerns about the Chinese property group Evergrande’s solvency.
“The worldwide equity selloff began overseas and then continued into the US equities markets. At its low today the Dow Jones industrial average was down 900 points before recovering.
“The Dow gave up 614 points in trading today and closed at 33,970.47, resulting in a net decline of 1.78 per cent. The NASDAQ composite lost 2.19 per cent and is currently fixed at 14,713.9030. The S&P 500 lost 1.70 per cent and is currently fixed at 4357.73,” technical market analyst Gary S Wagner said on FX Empire on Monday.
“The equity selloff in the United States was a result of concerns of the solvency of the Chinese property group Evergrande,” Wagner added, citing Reuters.
“Wall Street plunged on Monday as fear of contagion from a potential collapse of China’s Evergrande prompted a broad selloff and sent investors fleeing equities for safety,” Reuters reported.
The London-based news agency said a surge in gold was tempered by the dollar.
“Gold rose on Monday as fears about the solvency of ... Evergrande sparked a flight to safe-haven assets, but gains were capped by strength in the dollar ahead of the US Federal Reserve’s policy meeting,” it reported on Monday.
However, for the technical aspect, gold prices are still moving in the range of $1,742 to $1,805 per ounce, suggesting that a trend reversal is possible.
As such, traders should look for other fundamental confirmation, with the minutes of the Federal Open Market Committee meeting released on Wednesday, meaning gold prices could be on a bullish track if the Federal Reserve confirms a December taper.