Gold Price Chart and Analysis
- Gold prices remain close to one-year highs
- Hopes that there won’t be too many rate-hikes ahead are supporting non-yielders
- $2000/ounce is still a formidable hurdle
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How to Trade Gold
Gold prices have cooled a little in European trading on Friday although the metal remains close to one-year highs, and the tantalizing $2000/ounce region, as this market like all others assesses this week’s monetary policy decision from the United States Federal Reserve.
The US central bank raised interest rates yet again on Wednesday but notably toned down its ‘forward guidance.’ Financial markets certainly wouldn’t be surprised by further interest rate increases, but hopes that the ‘terminal rate’ may be very close have been raised by the Fed.
Stable interest rates, or, indeed, the prospect that they may come down, form a much better environment for gold bulls as the yellow metal of course carries no yield. Such assets tend to thrive when yields elsewhere are lower, especially in the bond market.
Now it seems likely that US rates will top out well below the 5.7% level markets were expecting when this month began.
The Fed did suggest that it won’t be looking to cut rates in 2023, and this may well have curbed some of the gold-market’s obvious post-hike enthusiasm. It’s worth pointing out, too, that inflation remains well above central ban targets in the US and across the world. The Bank of England underlined this point on Thursday by raising its own borrowing costs.
While prices are elevated, talk of rate cuts will always have a whiff of wishful thinking about them. Central bank price-control mandates are extremely clear and strict. That said, increased stresses on the banking sector along with ongoing conflict in Ukraine seem likely to ensure that haven assets retain a bid. Gold is of course the oldest haven of the lot, and has already enjoyed an impressive run higher since November of 2022., taking prices back to levels not seen since March of the same year.
Gold Prices Technical Analysis
Chart Compiled Using TradingView
Prices remain in a broad uptrend channel which has bounced the market in its climb up from last November’s lows.
However, the rise from March 8’s low of $1804.91 has been very rapid and the psychologically crucial $2000/ounce level seems likely to bring out the sellers. Therefore it’s not unreasonable to expect some consolidation into the week- and month-end before the bulls can think of girding themselves for a crack at the channel top. In any case, that remains some way above the current market, at $2045.19, a very rarified height indeed for the gold market. Bear in mind that $2078 was 2022’s peak.
Retracement support is likely to come in at $1913.87, with more minor support above it in the $1965-$1975 band. Early February’s peak of $1952 may also provide a prop.
Gold Retail Sentiment
of clients are net long.
of clients are net short.
According to IG’s sentiment data, the market remains bullish at current levels, with 57% of its clients net long. This has come down considerably in the last day or so though and may also attest to a bit of tiredness in this market, if not necessarily a heavy reversal.
–By David Cottle For DailyFX