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Gold Weekly Forecast: A Perfect Storm of Rates and Risk

Gold Weekly Forecast: A Perfect Storm of Rates and Risk

2019-06-22 22:00:00
Nick Cawley, Strategist
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XAUUSD

Gold Talking Points

  • Low inflation, low interest rates and increased risk, a gold bulls dream.
  • If the next resistance level is broken convincingly, gold may push back to $1,500/oz.+

Q2 2019 Gold Forecast and Top Trading Opportunity

Fundamental Forecast for the Gold: Neutral

The fundamental outlook for gold next week is neutral but for the medium-term prices are likely to move higher. The neutral forecast for the w/c June 24 is predicated on the velocity of this week’s move – up 5.9% at one stage low-to-high - which needs to be tempered before the bullish momentum resumes. The market is also extremely overbought using the daily CCI indicator.

Gold One-Hour Timeframe w/c June 17, 2019

XAU

This week both the European Central Bank (ECB) and the US Federal Reserve (FED) confirmed recent market thinking, that interest rates are going to move, and stay, lower for longer as growth and price pressures remain longer-term concerns. ECB President Mario Draghi said on Tuesday that all monetary tools remain at his disposal, mentioning lower rates and a potential re-start of the quantitative easing program, while Fed Chair Jerome Powell pointed to a 0.25% rate cut in July with one or potentially two more interest rate cuts this year. Lower interest rates however are here to stay, boosting the positive medium-term outlook, while inflation will likely remain stubbornly low for a long time. Against this backdrop, gold comes into its own as an asset class, especially with the US dollar weakening alongside lowered interest-rate expectations.

In addition, gold received a strong safe-haven bid as tensions between the US and Iran ratcheted higher over the course of the week, culminating in US President Trump ordering strikes on Iranian targets before pulling the order.

Professional traders would have enjoyed the week with the latest CFTC Commitment of Traders Report (CoT) showing gold long positions increasing further.

XAU

The Predictive Power of the CoT Report

The DailyFX Economic Calendar covers all market moving data releases and events.

The daily chart shows that gold touched its highest level in around six years this week, opening the way for further moves higher. The next level of resistance is at $1,433/oz. before an old gap created back on a bear candle in April 2013 comes into play between $1,495/oz. and $1,540/oz. The CCI indicator, mentioned earlier, highlights the risk of a short-term pull-back.

Gold Daily Price Chart (May 2018 – June 21, 2019) – CCI Indicator Extreme Overbought Territory

XAU

Traders may be interested in two of our trading guides – Traits of Successful Traders and Top Trading Lessons – while technical analysts are likely to be interested in our latest Elliott Wave Guide.

What is your view on the Gold – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author at nicholas.cawley@ig.comor via Twitter @nickcawley1.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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