Gold prices rebounded on Monday as the dollar slid its initial gains amid OPEC’s bets that surprise output cuts could push global energy prices higher and force central banks to raise interest rates. Analysts interpret the market and share their forecasts.
Gold vulnerable to a move towards $1,900
cryptocoin.comAs you follow, gold touched a one-week low of $1,949.54 during the day. StoneX analyst Rhona O’Connell says this looks like a ‘knee-jerk reaction’ to the dollar’s initial rally and also triggered some bargain hunting around the $1,960-1,965 levels. “You might think that OPEC could be supportive in the long run as it brings some uncertainty or new uncertainty to the market,” the analyst adds.
CME’s Fedwatch tool shows that markets see a 59.3% chance of the Federal Reserve raising rates by a quarter point in May. Also, markets see a 66% chance of the Bank of England increasing another 25 bps in May. City Index senior market analyst Matt Simpson comments:
Given the potential for a higher Fed interest rate that markets are currently pricing in, gold is currently vulnerable to a move towards $1,900.
These expectations also support gold prices.
GraniteShares portfolio manager Jeff Klearman said in a statement that gold rose primarily after bank failures. “The feeling of aversion to quality in the market has also supported gold prices, causing Treasury yields to fall sharply,” Klearman comments. In this context, Klearman makes the following statement:
While banking sector concerns have eased recently, expectations that the Federal Reserve will pause interest rate hikes and the likelihood of the Fed lowering rates this year have increased. These expectations were driven primarily by rising expectations for tighter loan terms as a result of regional banks’ curtailment of lending activities in light of their current situation. These expectations also support gold prices as Treasury yields continue to decline and the US dollar weakens.
Jeff Klearman also notes that inflation remains a cause for concern, but is far from its recent highs and appears to be on a downward trend. This, in turn, suppresses Treasury yields and the dollar, bolstering expectations that the Fed will pursue a less aggressive monetary policy. This also supports gold.
The yellow metal is flat for now, but…
The most active June gold contract broke above $2,000 on Friday. However, Colin Cieszynski, chief market strategist at SIA Wealth Management, says the precious metal continues to stagnate just below this key level as ‘investors try to decide whether to beat the big round figure’. “Gold is flat for now as the banking situation stabilizes,” the analyst said. However, this may change depending on how developments evolve from here.”
BullionVault research director Adrian Ash says physical bullion has reached new record end-of-month highs in the dollar, euro, yen, British pound and other major reserve currencies, with the London gold fix of $1,980 in the afternoon, a transaction price set by gold traders in London. . The analyst states that the first quarter of 2023 is ‘another bumpy period for precious metals’.
Technical analysis: Gold remains on bears’ radar
Technical analyst Anil Panchal points out the following levels in the technical picture of gold. The RSI (14) rebound from the oversold zone is allowing gold price to rebound near one-week lows.
However, bearish signals from the MACD and a clear downside break of the biweekly ascending trendline, along with continued trading below the 200-HMA and 100-HMA combination, are keeping the golden bears hopeful. On the other hand, the recent recovery remains difficult unless it crosses the $1,960 support-reversal resistance line.
Even if the bid breaks the $1,960 hurdle, the aforementioned HMA convergence near $1,970 looks like a hard nut to crack for gold bulls. It should be noted that the downward sloping resistance line, which last approached $1,987 on March 20, limited the short-term upward movement of Gold price.
Meanwhile, a bearish break of the recent swing low near $1,950 could renew gold’s south run targeting the 61.8% Fibonacci retracement level of the March 15-20 rise around $1,933. Overall, the gold price remains on the bears’ radar despite the recent corrective bounce.
This area turns out to be a good support
Open interest in the gold futures markets continued its downtrend, dropping by nearly 20,000 contracts on Friday, according to preliminary data from CME Group. Volume followed suit, dropping by nearly 16.8k contracts in the fifth session in a row.
Market analyst Pablo Piovano states that the decline in gold on Friday was due to the contraction in open interest and volume. According to the analyst, this indicates that a deeper pullback is unlikely in the near term. On the downside, the analyst expects the precious metal to face reasonable traction near $1,935 for now.
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