With support developing over the past week, the recovery is beginning to gather pace now. We turn near term bullish again whilst support around $1553 holds. This outlook changes below $1519.
The negative correlation between gold and the dollar is increasingly strong at over -0.7 now. This suggests that if the dollar is topping out (as it is beginning to threaten today), this should continue to support gold.
With Treasury yields capped and turned back lower again, this also comes as gold has also started to rally. The negative correlation between rising gold and falling yields is back on track. Essentially, it comes that yields falling back but now stabilising should be gold positive. If volatility can begin to settle down in Treasuries it should begin to see confidence spreading and the margin calls that have been the source of selling pressure through gold in recent weeks is at an end. We are seeing this to an extent today.
Our view remains that gold is fundamentally strong from here over the medium to longer term. There is huge open-ended asset purchases by the Fed and this will underpin gold in the months ahead. Enormously dovish major central banks, negative real yields and economic struggles are all positive for gold.
- $1559 – intraday low 24th March
- $1553 – 17th March high, neckline of base
- $1519 – Near term pivot now supportive
- $1597 – 13th March high
- $1604 – 38.2% Fibonacci retracement of $1445/$1702
- $1611 – 8th January high
After a huge sell-off on gold over the past couple of weeks, we are starting to see serious momentum in a recovery. Posting two consecutive positive candles (and developing into a third today) the rebound has left good support now at $1450/$1460 and is driving through the technical barriers that the bulls need to see for confirmation. The hourly chart shows this well, with the move initially above resistance at $1519 yesterday but also above $1553. This has completed a breakout for a base pattern. With momentum indicators increasingly positive on the hourly chart (RSI consistently between 40/80 whilst MACD lines are also around two week highs), the daily chart momentum is also increasingly in recovery mode. The daily chart looks to be at an interesting crossroads this morning. RSI has picked up to 50 and the rebound is trading around the 50% Fibonacci retracement (of the original $1445/$1702 rally) at $1573. A closing move decisively clear of the Fib level opens $1597 resistance and the old $1611 breakout. The hourly base pattern implies around $90 of recovery target (towards $1645) whilst there is a good band of support $1519/$1553 now as a near term “buy zone”. Initial resistance at today’s early high of $1583.