Fundamental Forecast for Gold: Bearish
- Crude Oil Hits 3-Week High, Gold Selloff Continues
- Post-FOMC Gold Price Breakdown Gathers Pace under $1320
- Sign up for DailyFX on Demand For Real-Time Gold Updates/Analysis Throughout the Week
Gold was sharply lower with the precious metal off by more than 3% for the second consecutive week to trade at $1293 ahead of the New York close on Friday. The losses have persisted despite continued weakness in the greenback with the Dow Jones FXCM Dollar Index (Ticker: USDOLLAR) closing the week just above key support at 10,500. The technical damage done to the gold rally is suggestive that further losses are likely heading into the start of the second quarter. But with major event risk on tap next week, the immediate outlook remains at clouded a bullion closes the week just above near-term support.
Heading into next week traders will be closely eyeing an array of event risk with the start of Q2 trade, the new fiscal year in Japan (Japanese tax hike takes effect April 1st), the ECB rate decision and the US non-farm employment report on tap. With end of month/quarter flows coming into play early next week, look for portfolio adjustments/rebalancing to possibly impact price play heading into the start of April trade. The main event nex week will likely be the highly anticipated NFP report on Friday where consensus estimates are calling for the addition of some 200K jobs last month with unemployment widely expected to shed another 0.1% to 6.6%. Look for an at-expectations print or better to keep the pressure on gold with only a more substantial miss on the print likely to offer some near-term support for the bulls.
From a technical standpoint, gold closed the week just above Fibonacci support at the 50% retracement of the advance off the December low at $1285. We’ll look to the April / weekly opening ranges to offer further guidance on a near-term bias while noting that the broader outlook remains weighted to the downside below last month’s opening range low at $1327. Look for a break sub-$1285 to open up a decline into a critical inflection point we have been noting for months now at $1268/70 with a move below the 61.8% retracement of the 2014 rally at $1260 targeting the 61.8% extension off the August 2013 high at $1234. Interim resistance stands at $1310 with only a move surpassing $1327 invalidating our medium-term outlook on gold. –MB