Fundamental Forecast for Gold:Neutral
- Gold Price at Risk Near-Term on a Return of USDollar Strength?
- Rising US Yields Push Gold Price towards April Low, $1277 Tipping Point
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Gold prices are firmer on the week with the precious metal advancing 0.52% to trade at $1300 ahead of the New York close on Friday. The advance comes on the back of a sell-off in broader risk assets this week with all three major US stock indices closing markedly lower on the session. Ongoing geopolitical tensions between Ukraine and Russia and continued weakness in the greenback have continued to offer support for the battered commodity which came off lows not seen since early February this week.
Looking ahead to next week, all eyes will be fixated on the US economic docket with the FOMC policy decision, advanced 1Q GDP and Non-Farm Payrolls on tap. The central bank is widely expected to taper QE operations by another $10Billion bringing the pace of asset purchases to $45Billion a month ($25Billion in Treasury purchases / $20Billion in MBS purchases). While no change is expected to forward guidance, traders will be looking to the accompanying policy statement for clues as to the Fed’s outlook on interest rates. 1Q GDP is released on Wednesday with consensus estimates calling for an annualized print of 1.2% q/q, down from 2.6% in 4Q as extreme weather in the Northeast in the early part of the year weighed on medium-term growth prospects. The April employment report rounds out the week with estimates calling for a print of 215K jobs, bringing the headline unemployment rate to 6.6% from 6.7%.
From a technical standpoint, the broader outlook remains weighted to the downside while below key resistance at $1327/34. This level is defined by the March opening range low, the 23.6% Fibonacci extension taken from the advance off the December 31st low and a longer-dated trendline resistance dating back to the 2012 high. Interim resistance stands at $1300/07 where the 200-day moving average, the 50% & 61.8% retracements and trendline resistance dating back to the March highs come into focus. Critical support rests at $1260/70 were barrage of Fibonacci extensions, retracements and pivots are clustered and a break/close below this thresholds risks substantial losses for the yellow metal targeting last year’s lows at $1178/80
Bottom line: Key interim resistance remains at $1327/34 and we continue to favor selling rallies with only a breach/close above this threshold invalidating the broader downside bias. The biggest risk to our outlook remains a broader risk sell-off which could trigger haven flows into the perceived safety of bullion. –MB