Market Analysis: Gold, S&P 500, CAC 40
Markets continue to weigh the possibility of further escalation in the US/China trade dispute but optimism continues as earnings remain strong
Gold continues to shine as investors look to hedge geopolitical and market risks. The precious metal has breached the $4,200 level for the first time ever as it continues to rally despite the technical outlook remaining heavily overbought. Key fundamental drivers remain: expectations of future US interest rate cuts, threats to US Fed independence, geopolitical risks around the world, US trade policy and tariffs and government fiscal policy and rising debt. This keeps the long-term bias skewed to the upside. In the short-term, watch out for overbought conditions deepening further, with the RSI at its highest level since 1979, suggesting some caution in the continuation of the rally. The key risks could stem from a repricing in rate cut expectations on the back of stronger data or a more cautious Fed, or a de-escalation on the several geopolitical fronts.
XAU/USD daily chart
Past performance is not a reliable indicator of future results.
US equities are resuming the uptrend after last week’s scare provided by Trump’s renewed tariff attack on China supported by a strong start to the Q3 earnings season. The S&P 500 is managing to eke out small gains throughout the week, but the bias remains cautious as investors keep an eye out for further developments on the tariff front. The trend remains supported so far with the 50-day SMA (6,560) offering the first level of support. A breach below could open up the space for a further retracement towards 6,400 at which point the RSI would have likely reset, attracting some potential dip buying.
S&P 500 daily chart
Past performance is not a reliable indicator of future results.
Meanwhile, European stocks are enjoying another strong start to the session after LVMH’s blowout update lifted sentiment across the region. The tariff escalation is weighing on sentiment on a global scale but domestically, improved sentiment around France’s political situation has enable some of the risk premium to be removed from the stock market. As a result, the CAC 40 is pushing a six-month high with further appetite looking possible towards 8,200, where previous resistance has emerged.
CAC 40 daily chart
Past performance is not a reliable indicator of future results.