Gold 1 OZ (XAU=X) Will Rally Once Stocks Stabilize
Gold futures are trading flat-to-lower shortly after the regular session opening on Thursday. The price action suggests investor indecision and impending volatility. The market has been highly correlated with stocks this week, and this relationship appears to be continuing today. Rising Treasury yields and a stronger U.S. Dollar have also weighed on demand for dollar-denominated gold.
At 13:40 GMT, April Comex gold is trading $1474.10, down $3.80 or -0.26%.
Essentially, the volatile price action in gold this week has been fueled by the stockpiling of cash. Investors sought to hoard cash in unstable market conditions despite additional measures from the European Central Bank (ECB) to deal with the economic fallout from the coronavirus outbreak.
Containing the Virus versus Protecting the Economy
So far investors haven’t responded much to loads of stimulus from governments and central banks. These moves have been implemented to boost the economy when the virus is contained, however, they are having very little short-term effect.
Cleary, investors want to see containment of the virus which means evidence that it has stopped spreading in the United States and positive movement toward a vaccine. At this time, no amount of credit and monetary stimulus can contain the virus, but it will make a difference later, once the economy starts to recover.
Reasons for Mixed Trade
The U.S. Dollar surged to a multi-year high earlier in the session, while bonds and stocks struggled to find their footing. Meanwhile, the announcement of the ECB’s latest stimulus measures provided only brief solace at a time when the global economy grapples to contain the pandemic.
Governments and Central Banks Take Measures to Combat the Economic Damage from the Virus
In Japan, traders are waiting for new economic stimulus packages. In Germany, the Chancellor urged citizens to adhere to rules aimed at reducing social contract
In the U.S., the Senate overwhelmingly passed legislation providing billions of dollars to limit the damage from the outbreak through free testing, paid sick leave and expanded safety-net spending.
More Near-Term Gold Selling Expected until Cash is Replenished
Holdings of the world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, fell 0.66% to 923.69 tonnes on Wednesday.
Gold owners are likely to continue to liquidate positions over the near-term in order to rebuild capital levels.
Gold investors are also watching the charts with $1468.30 to $1412.50 defined as a key support zone. Trader reaction to this zone will likely set the tone today. If there is a rally then $1577.60 to $1607.60 remains the primary upside target.
Overall, the bias in prices is: Downwards.
Note: this chart shows extraordinary price action to the downside.
The projected upper bound is: 1,532.46.
The projected lower bound is: 1,410.98.
The projected closing price is: 1,471.72.
A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 2 white candles and 8 black candles for a net of 6 black candles. During the past 50 bars, there have been 27 white candles and 23 black candles for a net of 4 white 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.
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 16.3484. This is an oversold reading. However, a signal is not generated until the Oscillator crosses above 20 The last signal was a buy 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 30.76. This is not a topping or bottoming area. However, the RSI just crossed above 30 from a bottoming formation. This is a bullish sign. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 0 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 -110.This is an oversold reading. However, a signal isn’t generated until the indicator crosses above -100. The last signal was a sell 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 sell 6 period(s) ago.
Rex Takasugi – TD Profile
PREC.M.XAU= closed up 3.690 at 1,473.490. Volume was 8,900% above average (trending) and Bollinger Bands were 235% wider than normal.
Open High Low Close Volume___
Short Term: Oversold
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period 50-period 200-period
Close: 1,554.08 1,582.25 1,502.85
Volatility: 28 24 18
Volume: 480 96 24
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 2.0% below its 200-period moving average and is in an downward trend. Volatility is high 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 bearish on XAU= and have had this outlook for the last 4 periods.
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