The selling pressure has finally begun to reduce, even if the price has fallen back again today. We eye the prospect of a recovery on a move above $1519 but for now the uncertainty suggests caution.
As things stand, gold is not acting as a safe haven. When equities sell off, gold also sells-off. This is not the normal response of markets. However, it is interesting to see that the inverse correlation of gold versus the US dollar has resumed (after a significant de-coupling throughout February). Furthermore, Treasury yields beginning to rise is also beginning to correlate once more with moves on gold (albeit less decisively than may be expected).
We still see the sell-off on gold as a near term move, and if markets can begin to settle, there should be a focus back on the fundamentals once more (enormously dovish major central banks, negative real yields and economic struggles in the months ahead). We see the fundamentals are in place for upside on gold over the medium to longer term, but for now, volatility is still too great for this position to take hold.
- $1495 – intraday low 18th March
- $1465 – 17th March low
- $1450 – 16th March low
- $1519 – near term pivot
- $1552 – 17th March high
- $1572 – 16th March high
After days of being smashed from pillar to post, the gold bulls at least had a something positive to cling to yesterday. A positive close, and mild positive candlestick suggested that perhaps some support was forming. It was interesting to see that in the past two sessions there have been surges of selling which have not breached the $1445 key November low, but also intraday rebounds to close above the 23.6% Fibonacci retracement (of $1445/$1702) at $1506. On the hourly chart, this shows as a higher low and higher high formation, breaking a downtrend and looking at more positive momentum. The question is whether this can now be built upon. For this, an early drop back this morning needs to build support again. As a bare minimum the bulls need another higher low above $1465, but ideally this would be building on support around $1506. With hourly RSI and MACD lines also having formed decent recovery configuration, it would be disappointing for them to also lose their improvements. For this, the hourly RSI need to hold above 35 (i.e. hold a run of higher lows). Resistance formed around $1545/$1553 yesterday and will now be a target for the bulls to overcome to build real recovery momentum. It is still very early stages, but at least the flood of selling has been restricted, for now.