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Trading outlook:
Gold continues along its near term correction as an unwind back towards the 3 month uptrend develops. We still see near term weakness as a chance to buy and will be watching for renewed buy signals now.
Fundamentals/Newsflow
The renewed move lower on Treasury yields is yet to sustainably haul gold higher this morning. This may be because the phenomenon of gold being hit amidst the selling rout on Wall Street is taking hold again. The explanation is that gold positions are closed due to portfolio margin calls. However, we still believe that once these selling orders dry up then the fundamentals for gold continuing to move higher will resume.
Fundamentally we remain medium-term bullish, due to the increasingly dovish interest rate expectations and increasingly negative real yields. We see any near term weakness therefore as a chance to buy whilst markets remain spooked by Coronavirus.
Support
- $1626 – 3rd March intraday low
- $1611 – old key breakout, January 2020 high
- $1604 – 3 month uptrend and 38.2% Fibonacci retracement of $1445/$1702
Resistance
- $1650 – intraday high 12th March
- $1671 – 11th March high
- $1685 – 9th March intraday high
Technical Analysis
We have been seeing an increasing number of signals on gold pointing towards a technical correction. With the hourly chart topping out under $1660 on Tuesday, the prospect of a downside target towards $1620 have come into play. Trading clear below the 23.6% Fibonacci retracement (of the $1445/$1702 rally) at $1642 has now opened the way for the $1620 target now. Yesterday’s bull failure at $1670 has left another lower high and a third consecutive bear candle adds to the corrective outlook. The hourly chart shows with today’s initial rebound failure at $1650 there is a near term pivot becoming increasingly prevalent too. The daily chart shows momentum indicators are rolling over now and are increasingly reflective of a near term pullback within the bullish medium term outlook. A Stochastics bear cross is close to being replicated on MACD. The supports within the medium term bull trend are coming back into focus, the old key breakout of $1611. The support of a three month uptrend sits at $1604 today.
