Going for gold: An intraday strategy
Gold’s current rally has been remarkable, as it continues to make fresh highs even against the backdrop of rising yields and a strengthening US dollar. Typically, we would expect higher yields and a stronger dollar to weigh on gold prices, but this unusual divergence is sending strong signals about the underlying demand for gold. A key driver here appears to be safe-haven demand, particularly from China, where investors are seeking refuge amid a struggling property sector, a weak stock market, and broader economic uncertainty.
Recent data on gold-backed ETFs, as of October 18, 2024, provides a clearer picture of this growing demand. We can see a significant inflow into gold ETFs globally, especially in North America and Asia. North America added 1,150.1 tonnes of gold with a 0.8% demand increase relative to holdings, signaling robust interest in gold despite the macroeconomic headwinds. Europe and Asia are also contributing to this trend, with 522.3 tonnes and 500.7 tonnes of inflows, respectively. Most notably, Asia saw a 3.2% demand increase, reflecting heightened buying from Chinese investors, who are looking for stable assets in light of ongoing challenges in the Chinese property sector.
This strong ETF demand is playing a critical role in supporting gold prices, providing a solid floor that could lead to further upside in the weeks ahead. Technically, we’re watching for a breakout/ pullback to the 2740 region for an intraday opportunity today, which could present an ideal long entry point. This level is important not just because of its technical significance, but also due to the underlying demand dynamics. A dip to this level would likely attract fresh buyers looking to capitalize on gold’s strength, which is being fueled by both traditional safe-haven demand and strategic buying from major regions like China.
In the broader context, this demand-driven rally is likely to persist, especially with growing uncertainties around the global economic outlook, including concerns over the upcoming US election, inflation risks, and geopolitical tensions. As we head into the final quarter of the year, investors should keep an eye on both ETF flows and the technical levels for gold. If we see continued ETF demand—especially from China—paired with any dips to key levels like it could offer a strong buying opportunity for traders looking to ride the next wave in gold’s uptrend.
To summarize: Despite a strong dollar and rising yields, gold remains well-supported thanks to robust ETF demand, particularly from China. A pullback to 2740 could present a solid long opportunity. Watch this level closely, as it could serve as a key entry point for buyers looking to capitalize on continued demand and favorable market conditions.