GOLD TODAY: Prices edging higher to challenge resistance

Short Term:
Medium Term:
Long Term:
Resistances:
R1 1,233 20 DMA
R2 1,249 50% Fibo Jul-Dec sell-off
R3 1,263.90 Feb 27 high
R4 1,290 DTL
R5 1,308
Support:
S1 1,239.80 Recent low
S2 1,233 20 DMA
S3 1,210 38.2% Fibo Dec Feb rally
S4 1,195 Mar 10 low
Stochastics:Bullish
Legend:

BB – Bollinger band

DMA – daily moving average

Fibo – Fibonacci retracement level

H&S – head-and-shouder pattern

HRL – horizontal resistance line

R/SL – resistance/support line

UTL – uptrend line

Analysis

  • Spot gold prices have rebounded strongly after the sharp retreat between February 27 and March 10. Prices have climbed back to $1,261.05 per oz – they dipped briefly before pushing higher again. Resistance is now seen at $1,261.05 per oz and at the February high at $1,263.90.
  • The 20 DMA had rolled over to the downside but it has since started to trend higher again. 
  • The stochastics are holding up in high ground. Although they had crossed lower, they are now crossed higher again.
  • We still think gold prices are emerging into a bull market although so far prices have climbed only 12.5% above the December low; a 20% move is deemed necessary to qualify as a bull market. That would require a move to $1,347 per oz, which is still a long way away.

Macro picture

CFTC data on Friday March 31 showed strong buying in the week to March 28, with 8,120 extra long positions added while 13,448 shorts covered. This has taken the net long fund position to 137,820 contracts, up from a recent low of 106,038 contracts on March 14.  

Political uncertainty in Europe and the USA alongside the potential for other markets to get disappointed about the reflation (or Trump) trade seem to be the driving factors supporting firm gold prices. 

The fact gold prices are rising in tandem with the dollar is also a strong sign that there is safe-haven buying interest around.

Conclusion

We remain bullish for gold and expect safe-haven buying to remain strong ahead of the looming French presidential election.

All trades or trading strategies mentioned in the report are hypothetical, for illustration only and do not constitute trading recommendations.
Kathleen Retourne

About Kathleen Retourne

Kathleen has been reporting on commodity markets since 2006. She joined FastMarkets in 2011 and has immersed herself into the metal industry, specialising in LME coverage. Follow her on twitter @kathretourne