Gold 1 OZ (XAU=X) Not Even Close to Full Picture
Gold, one of the few commodities to have performed well, so far, this year, is showing signs of exhaustion amid lack of fresh triggers.
If we look at spot gold, it has moved in a narrow range (high-low gap) of about $20 in last few days as against this month’s average intraday movement of $32. Spot gold has slipped below $1,700 per troy ounce level for the last two sessions but has so far managed to close above that level.
On the coronavirus front, some improvement is being reported at some hotspots. More and more countries are working towards reopening their economies. Improvement in the situation has reduced gold’s appeal as a safe-haven asset but market players are still nervous, as global cases have continued to rise at a fast pace and this has kept a floor to the gold price.
Reduced safe-haven buying has also pressurized the US dollar and this has also lent some support to the price.
Stability in financial markets has also given room to central banks to act and this has also brought a halt to gains in gold prices.
In line with market expectations, the US Federal Reserve kept interest rate unchanged at 0-0.25 percent on April 29.
However, the weaker economic readings and downbeat growth estimate highlight the intensity of the negative effect from the virus outbreak and this has kept expectations high that more measures may be considered.
US GDP fell 4.8 percent in Q1, beating market expectations of 4 percent decline. Fed Chairman Jerome Powell, in his post-meeting conference, warned that the health crisis could have a lasting impact on the economy.
FOMC statement also noted that the central bank was ready to use all tools and take appropriate measures to support the economy.
Investor buying also seems to have slowed down with rangebound price movement. Gold holdings with SPDR ETF stand at the highest level since May 2016, however, the pace of inflows has slowed.
Shayne Heffernan Trade Idea
“Economic data has not yet reflected the true scale of the economic disaster we are facing, but as numbers come out in the coming weeks, a risk-off sentiment could ensue. We have big risks still ahead for the U.S. economy and for other economies around the world. We are going to start to see economic data in the U.S. and in Europe show up that’s going to be really staggering, to remind us how serious the damage has been done to the global economy. There’s a lot of potential for investment demand to be strong.” Shayne Heffernan PhD in Economics
Why This Matters
Investment inflows helped push the gold price to a seven-year high during Q1, as global gold demand in value terms reached $55 billion – the highest since Q2 2013.
In the first quarter, global demand for the yellow metal inched up 1% year-on-year to 1,083.8 tonnes, in large part due to an 80% surge in total investment demand (to 539.6 tonnes) as investors look to safe-haven assets.
But spot gold is back below the $1,700/oz mark, down nearly 2% to $1,686.80 as of 1 p.m. EST Thursday. Gold futures for June delivery dropped 1% to $1,694.90 on the Comex. However, the metal is still on course for its best month in almost a year.
Gold-backed ETFs attracted huge inflows with 298 tonnes added, which pushed global holdings to a new record high of 3,185 tonnes, the Council said. Amid the economic uncertainty and financial market volatility, this was the highest quarterly inflow in four years.
Massive stockpiling of gold by investors during the covid-19 pandemic kept global demand stable for the first three months of 2020, offsetting marked weakness in consumer-focused sectors of the market, the World Gold Council reported on Thursday.
Overall, the bias in prices is: Upwards.
By the way, prices are vulnerable to a correction towards 1,617.59.
The projected upper bound is: 1,757.72.
The projected lower bound is: 1,595.92.
The projected closing price is: 1,676.82.
A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 4 white candles and 6 black candles for a net of 2 black candles. During the past 50 bars, there have been 26 white candles and 24 black candles for a net of 2 white candles.
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 17.9070. This is an oversold reading. However, a signal is not generated until the Oscillator crosses above 20 The last signal was a sell 3 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 50.35. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 30 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 -132.This is an oversold reading. However, a signal isn’t generated until the indicator crosses above -100. The last signal was a sell 5 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 sell 4 period(s) ago.
Rex Takasugi – TD Profile
PREC.M.XAU= closed down -3.928 at 1,676.162. Volume was 8,900% above average (trending) and Bollinger Bands were 29% narrower than normal.
Open High Low Close Volume 1,683.950 1,689.772 1,668.530 1,676.162 35,381
Technical Outlook Short Term: Oversold Intermediate Term: Bullish Long Term: Bullish
Moving Averages: 10-period 50-period 200-period Close: 1,704.01 1,637.99 1,541.87 Volatility: 18 32 20 Volume: 3,538 708 177
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 8.7% above its 200-period moving average and is in an upward trend. Volatility is low as compared to the average volatility over the last 10 periods.
Our volume indicators reflect very strong flows of volume out of XAU= (bearish). Our trend forecasting oscillators are currently bullish on XAU= and have had this outlook for the last 19 periods.
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