Selling pressure continues to swamp any sense of near term recovery on gold. Our call to buy into weakness is on hold (for now) as a test of the key $1445 November low grows increasingly likely.
Right now, momentum of selling pressure has just overwhelmed the gold market. With massive selling pressure across Wall Street, the precious metals have been smashed (platinum, palladium and silver all over -10% lower yesterday), whilst gold was also -2% but was well off its extremes of the session. This smacks of serious liquidation of funds and portfolios. Whilst this continues, the broader fundamentals of gold (which are positive) will not matter.
We notice that the relationship between moves on yields and gold has completely decoupled and continues to do so today. So, for now, we shelve our call to use the opportunity of weakness to buy gold for medium to longer term time horizons.
However, if and when markets can begin to settle, with the enormous dovish move from global central banks, negative real yields and economic struggles in the months ahead, we see the fundamentals are in place for upside on gold.
- $1450 – 16th March low
- $1445 – November 2019 low
- $1400 – August 2019 low
- $1505 – 76.4% Fibonacci retracement of $1445/$1702
- $1519 – intraday high, 17th March
- $1572 – 16th March high
The decline of gold and its intraday volatility are astounding right now (although this can be said of a lot of markets). Yesterday’s daily range of $122 was the fourth largest high/low range ever on gold and was more than double the Average True Range of $54. The trouble is that the bulls just cannot get a handle on the sell-off right now. A run of enormous bear candles has continued even into today’s session. Momentum has now taken a decisive turn for the worse, with RSI hitting 30. This is the lowest since August 2018, when recovery first started to build into the bull market that has been a feature of the past 18 months. Whilst the daily chart shows bear candles, we remain cautious. This is a bear move that has momentum for now and our positive medium term outlook (of using weakness as a chance to buy gold) is now on review. We need to see evidence of sustainable recovery before we have any conviction that buying gold will not simply be sold into again. The hourly chart is failing at lower levels, with bearish configuration across hourly momentum indicators. The hourly RSI is consistently failing around 50 and hourly MACD failing under neutral. A series of lower highs have formed, with initially $1519 now resistance, whilst a downtrend has also formed (around $1555 this morning). Although the market rebounded off $1450 (a significant move with current volatility) the rolling over at $1519 looks to be eyeing this support again. This also came a handful of bucks above the key $1445 November low, a breach of which would be a critical moment that would massively change the long term outlook.