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Gold Prices Bounce Off of Higher-Low; Is the Bull in Retreat?

Gold Prices Bounce Off of Higher-Low; Is the Bull in Retreat?

2017-03-01 17:45:00
James Stanley, Currency Strategist

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  • Gold Technical Strategy: Intermediate-term: Bullish move still alive after price action bounced off a ‘higher-low’ level of support.
  • With the rapid increase in odds for a rate hike in March, the bullish move in Gold prices may be fleeting. But if the Fed backs off, or offers dovish commentary to markets ahead of or around March, Gold will likely get another leg-higher.
  • If you’re looking for trading ideas, check out our Trading Guides. They’re free and updated for Q1, 2017. If you’re looking for ideas more short-term in nature, please check out our Speculative Sentiment Index Indicator (SSI).

In our last article, we looked at Gold prices staying within a relatively-clean range; even as the U.S. Dollar was showing signs of moving-higher. This highlighted the fact that Gold prices were seeming undeterred by rate hike fears.

Since then, we’ve seen another top-side expansion in Gold prices, as key levels at $1,248 and $1,250 (the Brexit Swing-Low) were taken-out by rising prices. Yesterday’s one-two combo of comments from San Francisco Fed President John Williams and then the Joint Address to the Union from Donald Trump served to spike us rate hike expectations-higher, and this led to an additional burst of strength in the Greenback; finally tilting price action in Gold a bit lower. This quick run of buyer-drive in the Greenback showed vividly in USD/JPY, EUR/USD and GBP/USD; but Gold prices continued to catch bids at current elevated levels. As we wrote this morning, for those looking to fade that quick rush of USD-strength, support in Gold prices could be pretty attractive for such a theme.

With odds for a March rate hike screaming-higher over the past 24 hours, Gold bulls will likely want to exercise a bit of prudence in the near-term. The primary point of consternation for Gold prices at the moment appears to be the possibility of a March rate hike. Over the previous two weeks, we’d seen the Fed make numerous hawkish denotations, but Gold prices were noticeably undeterred. But as we saw odds for March spike-higher yesterday, we began to see sellers taking control, albeit briefly. If this theme of USD-strength, led by rate hike expectations can continue for the next week, this could lead to an exciting reversal setup around the March FOMC meeting if the bank doesn’t actually hike.

Gold Prices Bounce Off of Higher-Low; Is the Bull in Retreat?

Chart prepared by James Stanley

On the chart below, we get a bit closer with the one-hour variety; and as we can see from near-term price action, bearishness appears around-the-corner. As long as markets are ramping up expectations around March, we’ll likely see some degree of this continuing to take place. Nonetheless, the longer-term up-trend remains intact and likely will until markets are fairly certain that the Fed will actually hike rather than just talk about it.

This opens the door for near-term bearish price action to drive prices down to longer-term support; and if the Fed does back-down from March, the bullish move can be ready to resume.

Gold Prices Bounce Off of Higher-Low; Is the Bull in Retreat?

Chart prepared by James Stanley

--- Written by James Stanley, Strategist for DailyFX.com

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