Gold Prices, Chart, and Analysis
- Gold prices continue to gain despite some signs of reduced risk aversion
- The prospect of few US rate rises ahead, if any, supports the market
- A new push above $2000 looks quite likely
Gold prices remain tantalizingly close to that psychologically important $2000/ounce handle on Friday, perhaps with divergent market impulses draining bulls’ appetite to try it as month-end is upon us.
On the one hand, a general prognosis that United States interest rates won’t be rising much further seems to be taking hold. Market expectations are that we’ll get one more quarter-point increase this year, assuming that inflation shows further signs of coming to heel. Higher interest rates sap appetite for non-yielding assets such as precious metals.
On the other hand, there’s been a modest re-emergence of risk appetite, boosted by hopes that banking stress rooted in higher borrowing costs won’t morph into a more widespread financial crisis. There were significant worries on this score earlier in the month when a couple of medium-sized US lenders got into difficulties and European giant Credit Suisse was rescued by long-time rival UBS Ag.
The data have perhaps been kind to gold too, if only at the margin. Official US Gross Domestic Product growth for the old year’s final three months was revised lower on Thursday. The annualized expansion was revised lower, to 2.6% from 2.7%. While this doesn’t have vast relevance to gold trading right now, it allows those focused on moderate rate rises ahead, if any, to stick with their view.
The case for gold looks fundamentally supportive, with very little serious threat visible to either the short- or longer-term uptrends. The question is perhaps whether the bulls can gird themselves to face the profit taking which is highly likely on any durable push beyond $2000, an altitude above which gold doesn’t often feel comfortable for long.
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Gold Prices Technical Analysis
Chart Compiled Using TradingView
The broad uptrend from last November’s lows is clearly very much intact, with no test of its lower bound seen since prices bounced at 1809.31 on March 8. The lower bound is now well below the market and guarded by various likely supports, not least the Fibonacci retracement of the rise up from November to this month. They come in at $1916.34 and $1857.89.
Neither looks very likely to be tested soon, but of more interest is the uptrend line from March 17. This has held the bears in check most effectively and now provides support at $1962.61. A fall below this line would not necessarily be a huge deal for gold bulls, and could suggest merely that the market has run out of a little steam.
However, while it holds the market is likely to try for the recent highs of March 24, at $2002.42, and March 23’s one-year peak of $2010.39. Bulls can expect a rough ride from profit-takers should prices get this high, however, even if they don’t face a significant reversal.
IG’s own sentiment data suggests there could be more room to the upside now, with 57% of traders bullish on gold.
--By David Cottle for DailyFX
