We remain cautious on near term longs as the consolidation continues to grow and as gold has formed a short term trading range between $1585/$1642. We are still bullish medium to long term and see near term corrections as a chance to buy.
We are still seeing a lack of certainty surrounding how gold moves from session to session. Yesterday’s sell-off can as US equities fell into the close, which seemed to reflect a continuation of what has become a positive correlation (which is abnormal). However, this morning as equities have continued to fall (sharply) gold has rebounded, questioning the positive correlation again. As the US dollar has strengthened today, it also questions the traditional negative correlation there too. Instead we see Treasury yields lower and safe haven assets trading strongly, with gold seemingly resorting to type.
It seems that intraday volatility on gold has increased again in the past 24 hours and this is seeing significant swings in the price, and an uncertain near term moves. Once these relationships and correlations begin to settle we see more clarity of gold price moves.
Ultimately, the mixed signals on gold continue to play out during these volatile times for financial markets. For today, this is driving uncertainty, but we expect traditional correlations to re-assert in the weeks to come. Looking longer term, once markets begin to settle, with real yields expected to remain low and negative with the massive easing of monetary policy, we expect gold to remain supported and medium to long term positive.
- $1584 – near term pivot now supportive
- $1560/$1561 – pivot and 31st March low.
- $1553 – neckline of recovery breakout
- $1612 – Intraday high, 31st March
- $1627 – Intraday high, 30th March high
- $1634 – 30th March high
After a few days of consolidation, volatility has returned to the gold price. The near term mini-range broke sharply lower yesterday as a strong negative candle which saw the price decline by -$50 on the day. Closing below the previous support around $1584 completed a breakdown which should now open for a continued move for pressure on the support band $1553/$1560 (which has been a pivot in recent weeks). However, the bulls have quickly responded today and engaged in a recovery. How this move develops on the hourly chart will now determine whether this move will be a technical rally that gets sold into. The hourly chart has taken on yesterday’s breakdown as a growing corrective configuration. Hourly RSI failing in the 50s, hourly Stochastics failing between 50/60 and hourly MACD lines below neutral reflect this. This all suggests that the intraday rally this morning (which has already added back as much as +$39) is still likely to be seen as a near term chance to sell. There is resistance of overhead supply around $1584/$1595 (and as far at $1606) and how the bulls react here today will be important as the initial negative move unwinds. The bulls need to hold this rebound and break a sequence of lower highs to prevent a near term corrective move gathering momentum. A bull failure of this rally today would suggest $1553/$1560 is a realistic target zone again. A close back under $1584 would be a negative signal now. Hourly RSI failing around 50/60 today would be a concern for the bulls. We continue to believe this would be a near term move lower before the bigger positive medium/longer term outlook takes hold. It would represent a chance to buy under medium term time horizons then.