- Gold Prices have recovered back into the $1940s from earlier sub-$1930 lows after finding support at the 50DMA.
- But XAU/USD still trades substantially lower on the day and versus earlier weekly highs at $2000.
- The backdrop of rising US yields and a strong US dollar have been unfavorable for gold.
Spot gold (XAU/USD) prices have seen a decent intra-day bounce from earlier sub-$1930 lows back to the mid-$1940s, with the 50-Day Moving Average at $1936 offering strong support. But the precious metal continues to trade with losses of about 0.4% on the day, having ended Thursday trade to the north of the $1950 level.
Gold continues to struggle to gain traction against a backdrop of still rising US yields (on Friday mostly at the front-end of the curve) and a strong US dollar, with markets pricing in a more aggressive Fed tightening cycle. In the last few days, in wake of Fed Chair Jerome Powell and other Fed policymakers opening the door to 50 bps rate hikes (some even hinted at larger moves), big US banks have been falling over themselves to hawkishly revise their Fed policy change calls.
Nomura was in the headlines with a prediction that after a 50 bps rate hike in May the Fed would then follow up with a further two 75 bps rate hikes in June and July. This isn't a good backdrop for gold. Rising interest rates mean the "opportunity cost" of holding non-yielding assets like gold has gone up and this tends to dent demand. The Fed now goes into blackout ahead of the 3-4 May meeting, meaning precious metals might get some respite in the days ahead from hawkish Fed-related bearish flows.
The big question investors will face next week will be whether 1) gold can make headway back towards this week's $2000 highs amid demand for inflation/stagflation protection as growth fears rise and geopolitical tensions remain elevated, or 2) will gold continue dropping towards recent lows in the $1900 area amid an unfavourable macro backdrop.
Gold Price technical analysis
On an hourly scale, XAU/USD has formed a double bottom chart pattern, which signifies a bullish reversal amid the absence of high-volume sellers while re-testing the critical bottom. The gold prices have witnessed a sheer upside after the successful retest of Wednesday’s low at $1,939.31. The Relative Strength Index (RSI) (14) has defended itself from slipping into the bearish range of 20.00-40.00. Also, the precious metal has established above 20-period Exponential Moving Average (EMA), which signals more gains ahead.
Gold Price hourly chart
On the other hand, the W-formation could be problematic and a restest of the neckline could be in order:
Additionally, the daily wick and bearish close is a bearish formation which could give rise to a mitigation of the early April rally's imbalance of price for a test into a deeper demand area:
On the other hand, the M-formation is also compelling on the daily chart and should bulls commute at hourly support, then the neckline would be expected to pull the price in.