Spiking back higher the volatility continues, but we continue to see gold being supported. Once near term volatility begins to settle, we expect gold to remain with a positive medium term outlook. We use the opportunity of buying into weakness.
Gold has shot higher again in the wake of the surprise Fed rate cut. Treasury yields are falling, meaning that real yields are deepening into the negative, a condition that is medium-term gold supportive.
The one main caveat for gold moving higher is the condition of a plummet on Wall Street equities leading to margin calls and another corrective move similar to last Friday’s sharp sell-off on gold. In a more orderly market, we see gold being supported by what is likely to be increasingly dovish coordinated central bank moves.
- $1625 – old 26th February low ($1626 was the intraday low 3rd March)
- $1611 – 8th January high, old key breakout, also 2nd March high
- $1584 – near term higher low, intraday low 2nd March
- $1651 – 4th March intraday high
- $1660 – 27th February high
- $1688 – major, multi-year high, 24th February high
Pretty much exactly a week ago, gold was trading fairly quietly around $1640. If you had missed the past week, you would be forgiven for not knowing what all the fuss has been about. However, another wild day of volatility on global financial markets and the gold price has shot back higher on the surprise Fed rate cut. We have been discussing the prospect of buying gold into weakness, but we did not envisage the moves that we have seen to get here. The uptrend support has kicked in (today around $1590) whilst momentum indicators are ticking higher again. The RSI back around 60 (from 50) is positive, as are the Stochastics also ticking higher, around the levels they were at as the February rally kicked in. We still favour long positions from here, but given the wild volatility shows little sign of settling down, we cannot rule out further weakness that would be a chance to buy. It will be interesting to see where the 23.6% Fibonacci retracement (of $1445/$1688) at $1631 begins to develop as a basis of support again. The hourly chart shows an old low around $1625 has been a basis of support in the past 12 hours. Resistance initially a $1651 and then $1660.