With the dollar rebound faltering already, the near term selling pressure on gold has once more dissipated and the neutral outlook has taken hold again. Ultimately we continue to favour upside pressure on resistance and buying into weakness, however, for now the outlook is increasingly rangebound.
The near term dollar rebound which was dragging gold back has begun to ease again, allowing gold to drift back higher once more.
There is an uncertainty about near term dollar moves right now which is leading to an uncertain outlook on gold too. However the Dollar Index is continually failing around 93.50/94.00 resistance and this should restrict downside moves on gold. We continue to expect that the dollar will break lower again in due course, whilst this should help to pull god for an upside break.
Treasury yields are consolidating right now, something which adds to the gold consolidation too.
Looking longer term, we believe the outlook for gold will be driven by a “lower for longer” dovish Federal Reserve monetary policy outlook. The September FOMC decision shows willingness to accept higher inflation and not hike rates until 2023. This will help to underpin gold in the months and likely quarters to come. Continued looser for longer global monetary policy will keep real yields subdued/negative and should mean that gold remains attractive. Subsequently, this is still a good environment to be buying gold into supported weakness.
- $1937/$1940 – near term pivot band ($1932 was a spike low)
- $1920 – 9th September low
- $1902 – 26th August low
- $1962 – intraday high 16th September high
- $1974 – 2nd September high
- $1992 – 1st September high
Over recent weeks, the outlook for gold has become increasingly rangebound. This has led to the development of a trading range between the extreme price moves $1902/$2015. This ranging outlook is reflected in momentum indicators flattening around their neutral points. Daily candlesticks fluctuate between positive and negative, often with small bodies (denoting uncertainty). The bulls continue to protect the 23.6% Fibonacci retracement (of $1451/$2072) at $1926 (at least on a closing basis anyway).
On the hourly chart, we also see the willingness to buy around the $1937/$1940 pivot too. Pulling higher overnight, back above $1950 leaves a slight positive bias this morning and potential for pressure towards $1972/$1974 which is the next resistance area. We remain neutral in the range for now, but above $1974 would be a positive move for pressure on $1992/$2015. A close below $1937 would increase near term downside pressure towards the range lows again.
STRATEGY: Recent choppy trading and lack of trend leaves a neutral outlook between $1940/$1974 for now. Moving below $1937 leaves a negative bias whilst a close below $1926 begins to look more decisively corrective. This puts our positive outlook towards $1992/$2015 on hold for now, whilst this uncertainty plays out. Above $1974 turns the outlook more positive for a test of $1992/$2015.