The bull rebound has just hit the buffers slightly, so we turn near term cautious. We remain medium to longer term bullish and see any unwinding move back towards $1550/$1560 as a chance to buy.
The gold trally has hit the buffers in the past 36 hours. This has come as Treasury yields have consolidated. It seems that the negative correlation between the two (especially between gold and the 10 year yield) is still a key factor.
The falling US dollar should be gold supportive (again a strong negative correlation) but despite this gold is pulling back lower today.
Playing into gold’s weakness today could be the fact that traders may be fearful that gold could suffer if the broad market sell-off resumes. We only see this weakness as a near term move and believe that it will be the source of buying opportunities. Our view remains that gold is well positioned for medium to longer term outperformance. This comes as the major central banks are engaging in massive balance sheet expansion once more, whilst real yields will remain depressed. In the months ahead, enormously dovish major central banks, negative real yields and significant reduction in economic growth leaves gold well placed to perform strongly.
- $1585 – 25th March low (and 24th March intraday low / pivot)
- $1560 – near term pivot
- $1553 – 17th March high, neckline of base
- $1617 – intraday high 26th March
- $1625 – intraday high 25th March
- $1635 – 25th March high
The sharp bull run (which added around 12% back on to gold) has just begun to roll over. The near term positive momentum is just turning into consolidation. The daily chart shows a small negative candle yesterday (albeit with a positive close) but this is now being pulled lower this morning. The impetus in the rise on Stochastics and RSI is tempering. The hourly chart shows this as more of a consolidation but the price is still at risk of a near term drift back towards the key breakout $1553/$1560 which is a pivot area. The hourly chart also shows the initial support to watch remains at $1585 which has turned into a pivot over the past couple of days. A drop below $1585 would open the move towards $1553/$1560. Resistance is beginning to form under the $1635 rebound high, at $1625 and $1617 today. Gold has turned into a near term consolidation with corrective potential (especially if hourly RSI begins to fall below 40). However, we would continue to view near term weakness on gold as a medium term buying opportunity.