Gold Price, Analysis and Charts.
- Gold nears 13-month high, but market looks heavily overbought.
- US dollar weakens as US rate cuts now dominate market thinking.
Gold Eyes Fed Powell’s Commentary for Next Move
Gold continues to push higher, prompted by a weaker US dollar and continues risk-off sentiment. The US dollar’s last leg lower was fueled by comments from St Louis Fed President Bullard who said that an interest rate cut may be’ warranted’ soon. Bullard is a well-known FOMC dove, so while his view carries heft, today’s commentary from Fed Chair Jerome Powell will carry more weight. Chair Powell will be discussing policy strategy today at the Chicago Fed Conference.
Yesterday’s comments from Bullard sent US Treasury yields lower, with the 2-year now offering just 1.875%, down from 2.61% in mid-January this year. The US 10-year currently offers 2.09%, down from 2.79% over the same time-frame. The markets are now pricing-in around 60 basis points worth of easing in the US by the end of the year.
Against this backdrop, and aided by a risk-off sentiment, gold has rallied hard and is around $18 way from making a fresh 13-month high. We noted two weeks ago that gold was being compressed in a tightening pattern and that a sharp move was likely.
Gold has now rallied over $50/oz. in the last week and is looking heavily overbought using the CCI indicator. The February 20 high at $1,346/oz. is the next bull target but a short-term move here is unlikely unless the Fed’s Powell turns dovish is his commentary. The strength of the recent rally has left little in the way of technical support over the last week with horizontal resistance seen at $1,324/oz. ahead of $1,311/oz.
Gold (XAU) Daily Price Chart (March 2018 – June 4, 2019)
IG Client Sentiment data show that retail traders are 68.0% net-long gold, a bearish contrarian indicator. Recent daily and weekly sentiment shifts however suggest that gold may soon move higher despite traders being net-long.
--- Written by Nick Cawley, Market Analyst
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