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Gold Price Forecast: Gold Bulls Last Line of Defence

Gold Price Forecast: Gold Bulls Last Line of Defence

Justin McQueen, Analyst

Gold Price Analysis and News

  • Gold Records Worst Monthly Performance Since November 2016
  • Gold Needs Powell to Address Rise in Yields For Reprieve

Gold Records Worst Monthly Performance Since November 2016

A reality check for gold bulls after the precious metal recorded its worst monthly performance since November 2016, having fallen over 6% for February. However, those looking for a reprieve may be left disappointed given that gold is also in the midst of a seasonally challenging time. The sizeable rally in global bond yields and the more recent bid in the greenback has notably reduced the appeal for holding gold and thus risks remain tilted to the downside.

Gold Needs Powell to Address Rise in Yields For Reprieve

That said, with both the ECB and RBA tackling the rise in nominal yields, the latter aggressively restarting their bond purchases, the focus will be on the slew of Fed speakers and in particular Chair Powell on Thursday as to whether they will verbally address the rise in yields ahead of the blackout period. The current stance has been that the Fed are not concerned with the rise and signalled that this is largely in response to economic optimism, should Powell reiterate this message, the US 10Y is likely to retest 1.5%, raising the likelihood that gold moves to the psychological 1700.

Bulls Last Line of Defence

In the short run, should the Fed remain unconcerned over the rise in yields, I struggle to see much to remain optimistic about for gold. On the technical front, the precious metal is in a well-defined downtrend with the break below key support at 1760 placing gold in a new range. Support resides at 1690-1700, which could be the bulls last line of defence with a close below opening the door to 1650.

On the topside, a close above topside resistance at 1760 (prior support, now resistance) will be needed to alter the technical landscape. Gold is also oversold on the daily timeframe, while a bullish divergence on the 4 hour time frame signals that declines may slow from here and perhaps underpin slightly. That said, eyes will be on the bond market as to whether gold can muster some support with comments from Powell key to the short term outlook.

Gold Mixed
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of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 0% 0% 0%
Weekly -2% 3% -1%
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Gold Chart: Daily Time Frame

Gold Price Forecast: Gold Bulls Last Line of Defence

Source: Refinitiv

Gold Chart: 4 Hour Time Frame

Gold Price Forecast: Gold Bulls Last Line of Defence

Source: Refinitiv

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