Gold looks poised to resume rally

11 April, 2016

Safe haven gold found strong support on Thursday in response to the falling equity markets and US bond yields, with the latter helping to accelerate the USD/JPY sell-off. Profit-taking at the start of Friday’s session saw these assets move in the opposite direction. Gold was thus a touch weaker at the time of this writing after Thursday’s big rally. It remains to be seen whether equities and/or the US dollar will come under renewed selling pressure as we move into the North American session.

The US currency has been trending lower in recent months. Before the start of the year, the Federal Reserve had hinted at four US interest rate hikes in 2016. However, the incoming data in the first quarter of this year has been mixed at best and as a result the Fed has been quick to change its tone regarding the pace of future interest rate increases. Indeed, according to the CME Group’s FedWatch tool, the probability of even one rate rise in 2016 is now lower than 50 per cent. Meanwhile, the euro has been rising despite the European Central Bank’s decision to expand its QE stimulus package in March. This type of market reaction strongly suggests that the EUR/USD exchange rate may have bottomed out. If so, the Dollar Index could fall further, which may, in turn, help to underpin buck-denominated assets like gold and silver.

However, while the recent dollar selling in response to the Fed turning less hawkish makes sense, it may be overdone a little. US economic data could easily turn positive as a result of the recent depreciation of the dollar, while inflation could overshoot expectations if oil prices continue their sharp recovery from Q1. These potential scenarios could force the Fed to pursue a more aggressive tightening cycle, which could see the US dollar regain its composure once again. So, gold’s potential gains could be limited – that is unless the equity markets start to fall sharply once again, which would undoubtedly boost the appeal of all safe haven assets.

But in the shorter-term outlook, the volatility of the dollar will likely have a big say in gold’s direction. As such, gold traders may want to watch next week’s key data releases from the world’s largest economy closely – in particular, the PPI (on Wednesday) and CPI (on Thursday) measures of inflation. China will also be in focus once again as it publishes its latest macroeconomic data, including trade figures (Thursday), industrial production, retail sales and first quarter GDP (all on Friday). The figures will be particularly important for industrial metals, such as iron ore and copper. But silver is also used for industrial purposes. Thus, an improvement in data, if seen, may boost expectations about demand for silver. Gold demand from China has been somewhat weak this year.

Technical outlook: gold

Gold looks poised to push further higher for it has now broken above a short-term corrective trend, as can be seen on the daily time chart below. Earlier in the week, the precious metal had found strong support at around the $1215/18 area, which also corresponds with the rising 50-day moving average. The 50- has recently crossed above the 200-day moving average, with the latter now also turning higher. The RSI momentum indicator has broken its own bearish trend after working off “overbought” conditions without significant price erosion. So price action is undeniably bullish inside what still is a consolidation pattern between $1200 and $1284 area.

If the precious metal goes on to break the next level of resistance at $1242, the bulls may th


Source link  
Gold surges to major $1250 resistance as uncertainty prevails

Gold surged Thursday on a breakout of its previous consolidation to hit and slightly exceed major technical resistance at $1250, a level not seen since early November...

Gold remains vulnerable amid hawkish Fed, strong dollar, equity highs

Gold has climbed sharply since the beginning of the year as the US dollar has pulled back from its late-2016 highs and the US Federal Reserve has exercised characteristic restraint in raising interest rates further after the last rate hike in December...

Gold well-supported on safe-haven flows, lagging dollar

Increasing political and economic uncertainties under the new Trump Administration, coupled with a sliding US dollar since the beginning of the year, have led to a sharp rise in gold prices for more than a month...


Gold pressured as dollar and equities remain supported

As the US dollar found some new life on Thursday and US equity markets hovered right around their new all-time highs, gold extended its recent pullback well below the $1200 handle. Since late December, the price of gold had been in a sharp relief rally from its 10-month lows around $1125 support...

Crude oil maintains bullish trend

Oil prices were initially weaker at the start of the new week, but they have now recovered to trade almost flat at the time of this writing. At the weekend, the OPEC and some producers outside of the group met to discuss the progress of their oil production deal...

Trump press conference fails to deter equity bulls

President-Elect Donald Trump spoke on Wednesday morning at his first formal press conference since the November elections, and the markets were all ears. Trump covered a lot of ground with multiple topics that included...


Gold ripe for potential relief rally

The charts tell a clear story of the unrelenting plunge in gold prices since early November. This steep dive has been the result of several related factors, all of which have the potential to extend well into the new year. These largely Trump-driven factors include...

Could EUR/USD finally break 1.05 on this FOMC day?

The market is demanding a rate rise and the Fed better deliver it today, for if it doesn’t the bank’s credibly will be severely damaged. There is really no excuse not to do so. Economic data has been improving, financial markets are calm...

Mixed Jobs Report Keeps High Fed Expectations Intact

As we noted the day before Friday’s US jobs report, only a significantly worse-than-expected reading for November would have likely made the Federal Reserve’s next interest rate decision more difficult...

  


Share: