GOLD PRICE FORECAST
- Flight to safety backs bullion.
- U.S. Treasury yields dip.
- Oil hits multi-year highs.
XAU/USD FUNDAMENTAL BACKDROP
Markets poured into spot gold on the back of a Russian invasion into Ukraine leaving global markets risk off. Predictable safe-havens are higher today while supply disruptions to the commodities markets left most commodities largely in the green. The aim from a political standpoint would be to stop Russia from further attacks by imposing additional sanctions and attempting to find other possible diplomatic solutions.
Crude oil prices reached levels last seen in 2014 which will likely add to the already challenging inflationary environment and could play into the hands of golds questionable ‘inflation hedge’ narrative.
Investors further sought refuge in the U.S. dollar despite sinking Treasury yields across maturities (see chart below). These lower yields support gold upside lowering the opportunity cost of holding bullion.
U.S. 2/10/30-YEAR TREASURY YIELDS
Source: Refinitiv
Federal Reserve interest rate probabilities for the upcoming March meet has fallen drastically in terms of a 50bps hike, which has been largely dismissed overnight (see table below). This dovish pivot which has been the recent trend since the inception of Russia/Ukraine tensions.
FEDERAL RESERVE INTEREST RATE PROBABILITIES
Source: Refinitiv
TECHNICAL ANALYSIS
GOLD PRICE DAILY CHART
Chart prepared by Warren Venketas, IG
Spot gold smashed June 2021 highs and now challenges the January swing high at 1959.45. We are likely to see whipsawing price action throughout the day as news flows tug at market movements.
Resistancelevels:
- 2000.00
- 1959.45
Support levels:
- 20-day EMA (purple)
- 1850.00
IG CLIENT SENTIMENT BEARISH
IGCS shows retail traders are currently distinctly long on gold, with 69% of traders currently holding long positions (as of this writing). At DailyFX we typically take a contrarian view to crowd sentiment resulting in a short-term downside bias.
| Change in | Longs | Shorts | OI |
| Daily | 4% | 8% | 6% |
| Weekly | -13% | 25% | 2% |
Contact and follow Warren on Twitter: @WVenketas
