There is a sense of two steps forward and one step back on gold right now as the traction of the breakout is again curbed. We remain bullish and see weakness as a chance to buy, as the technical and fundamentals are all aligned in pointing towards further gains in due course. However, the near term positive outlook continues to stutter. This does lend some opportunities to buy though and holding above $1722 we are still confident of the current bull run higher.
Gold has been tentatively testing higher through this week, but again is just coming up short of a decisive move. We feel that this may become indicative of the coming weeks. Although we remain confident that gold will be pulling higher over the medium to longer term, the road there will be rocky.
Treasury yields remain stuck rangebound, as does the dollar. With these continuing we believe that the move on gold to new multi-year highs will be at risk of lacking traction.
Below we see the range on the 10 year Treasury yield. Given the historic strong negative correlation with gold, this could restrict the capacity for gold to pull consistently higher.
Also the range on the dollar.
Despite this though, the medium to longer term set up (near zero rates from the Fed and economic hardship to continue) is positive for gold. The nearer term outlook could be difficult to navigate though. We remain confident that gold will be moving higher, but it could continue to be difficult to find real traction for consistent trending.
We see the fundamentals as being supportive for gold over the medium to longer term and that any near term price weakness as a chance to buy.
- $1722/$1724 – band of pivot support, old 7th and 8th May highs and 19th May low
- $1709 – 14th May low
- $1702 – old breakout support and pivot
- $1753 – 20th May high
- $1764 – 18th May high – key multi-year high
- $1795 – 2012 high
Although gold has now posted two positive sessions in a row since Monday’s shooting star candlestick, with today’s early tick lower, there is a sense that this move to new multi-year highs will be a slow and steady move. Once more, the sense of strong bull control is being dragged back. This adds a degree of caution to the outlook once more. Despite this though, we still see weakness as a chance to buy.
Having spent much of this week looking to breakout, there is now an uptrend channel that can be derived of the past three weeks. The basis of this channel continuing to pull higher remains the pivot around $1722. Channel support comes in around $1710 today and we would still view this near term corrective slip as a chance to buy.
Momentum indicators reflect a mild positive bias still, with RSI consistently above 50 and MACD lines above neutral. However, it is important for this slide back to find support above $1722 (which has held throughout the past week) for the near term bulls to remain in control.
Below $1722 there begins to be a slightly more corrective outlook. Under the old $1702 breakout would be a disappointment now for the bulls. Resistance is at yesterday’s high of $1753, under Monday’s $1764 multi-year high.
STRATEGY: A three week uptrend channel suggests that near term weakness remains a chance to buy for further multi-year highs in due course, however, the bulls are having to work hard. A breach of $1722 support would leave immediate bullish prospects neutralised. Back under $1702, the outlook is on far more shaky ground. We still favour medium to long term positions towards $1800 but the near term outlook has less conviction for now.