Gold 1 OZ (XAU=X) nears 13-month high, but market looks heavily overbought
Gold continues to push higher, prompted by a weaker US dollar and continues risk-off sentiment. The US dollar’s last leg lower was fueled by comments from St Louis Fed President Bullard who said that an interest rate cut may be’ warranted’ soon. Bullard is a well-known FOMC dove, so while his view carries heft, today’s commentary from Fed Chair Jerome Powell will carry more weight. Chair Powell will be discussing policy strategy today at the Chicago Fed Conference.
Yesterday’s comments from Bullard sent US Treasury yields lower, with the 2-year now offering just 1.875%, down from 2.61% in mid-January this year. The US 10-year currently offers 2.09%, down from 2.79% over the same time-frame. The markets are now pricing-in around 60 basis points worth of easing in the US by the end of the year.
Against this backdrop, and aided by a risk-off sentiment, gold has rallied hard and is around $18 way from making a fresh 13-month high. We noted two weeks ago that gold was being compressed in a tightening pattern and that a sharp move was likely.
Gold has now rallied over $50/oz. in the last week and is looking heavily overbought using the CCI indicator. The February 20 high at $1,346/oz. is the next bull target but a short-term move here is unlikely unless the Fed’s Powell turns dovish is his commentary. The strength of the recent rally has left little in the way of technical support over the last week with horizontal resistance seen at $1,324/oz. ahead of $1,311/oz.
Overall, the bias in prices is: Upwards.
The projected upper bound is: 1,348.02.
The projected lower bound is: 1,304.42.
The projected closing price is: 1,326.22.
A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 6 white candles and 4 black candles for a net of 2 white candles. During the past 50 bars, there have been 22 white candles and 28 black candles for a net of 6 black candles.
A spinning top occurred (a spinning top is a candle with a small real body). Spinning tops identify a session in which there is little price action (as defined by the difference between the open and the close). During a rally or near new highs, a spinning top can be a sign that prices are losing momentum and the bulls may be in trouble.
Three white candles occurred in the last three days. Although these candles were not big enough to create three white soldiers, the steady upward pattern is bullish.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 94.7499. This is an overbought reading. However, a signal is not generated until the Oscillator crosses below 80 The last signal was a sell 5 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 72.26. This is where it usually tops. The RSI usually forms tops and bottoms before the underlying security. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 72 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 212.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a buy 8 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 3 period(s) ago.
Rex Takasugi – TD Profile
PREC.M.XAU= closed up 1.367 at 1,326.137. Volume was 8,900% above average (trending) and Bollinger Bands were 28% wider than normal.
Open High Low Close Volume___
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 1,292.88 1,287.77 1,261.92
Volatility: 12 11 11
Volume: 1,198 240 60
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
PREC.M.XAU= is currently 5.1% above its 200-period moving average and is in an upward trend. Volatility is extremely high when compared to the average volatility over the last 10 periods. There is a good possibility that volatility will decrease and prices will stabilize in the near term. Our volume indicators reflect very strong flows of volume into XAU= (bullish). Our trend forecasting oscillators are currently bullish on XAU= and have had this outlook for the last 15 periods. Our momentum oscillator is currently indicating that XAU= is currently in an overbought condition.