Gold is within the hands of the bulls but a correction is on the cards.
The monthly outlook is critical which makes subsequent few weeks testing for the gold market.
Update: Gold (XAU/USD) edge higher around $1,837, up 0.10% intraday, before Tuesday’s European session. In doing so, the gold prices print a four-day streak because the US dollar fails to increase the previous day’s recovery moves.
Although the reflation fears jump back to the table, exerting downside pressure on the stock futures, the US Treasury yields remain mostly inactive, despite pausing a two-day uptrend. Also, the Fed policymakers are flashing mixed signals over the longer term course of action and hence unearth the doubts over easy money policies after Friday’s US jobs report back the doves.
As a result, the greenback gauge defies the bounce off 10-week low amid cautious sentiment before Wednesday’s US Consumer price level (CPI) for April, which successively keeps a tab on gold buyers.
Update: Gold is consolidating gains sub $1,840 level within the Asian session. the worth of gold possessed a rangebound movement between $1,830 and $1,838. At the time of writing, XAU/USD is trading at $1835.75, down 0.11% on the day.
XAU/USD hourly chart
On the hourly chart, the downward sloping line from the previous day’s high of $1,845.46, acts as a wall of defense for gold bulls, keeping prices a tad below the $1,840 mark. an opportunity and sustained move beyond the descending trendline is mandatory to continue with the upward momentum. The momentum oscillator, the Relative Strength Index (RSI) remains optimistic above 50.
The price of gold is firmly within the bull’s hands which are often seen not only within the commodity exchange but within the most up-to-date CFTC positioning data and futures markets.
Of late, money managers increased gold length in covering relatively large amounts of their short exposure.
From a fundamental standpoint, the speed environment became more favourable.
The recent Nonfarm Payrolls data, counterintuitively, has sent markets into a buying frenzy for riskier asset classes which have hammered down the nail for the US dollar and have underpinned the worth of the alpha-beta brass .
”While statements from the US financial institution pointed to unwavering support for a financial condition policy, albeit inflation trends move convincingly above target, some specs (likely trend-following funds) still reduced longs by alittle amount,” analysts at TD Securities explained.
”A disappointing jobs report, which featured above expected wage increases and unemployment rates, suggests that gold is well-positioned to challenge technical resistance near $1,850/oz,” the analysts added, which brings us to the subsequent charts.
Gold price technical analysis
The monthly conditions are ripe for an honest test of the psychological 1,850 level and therefore the 61.8% Fibonacci retracement of the prior bearish impulse.
Should the market be firm there with many offers, then the liquidity could expel the bulls and will be the idea to ascertain an onwards downside continuation over the approaching months.
With that being said, and in line with the present fundamentals which are supporting the prospects of a full-on supercycle in commodity prices and relation, then an opportunity of the foreseen resistance would be another string to the bow for a bullish continuation.
Indeed, subsequent weeks are going to be a crucial one for the gold market and bulls will got to see a bullish month-end close.
As for the weekly chart, the W-formation was completed during a textbook fashion.
The price made an ideal retest of the W-formation’s neckline before extending higher during a new bullish impulse.
However, the impulse has been very strong and has surpassed a -61.8% Fibonacci retracement of the prior correction.
Nevertheless, markets wish to push the barriers and following perhaps a healthy daily correction, then the 1,850’s may even subside to a deeper test of the expected supply zone.
A break of the availability zone should leave the bulls in good stead for the forthcoming weeks.
As acknowledged , the present bullish leg is somewhat overextended and therefore the daily chart illustrates just that.
A correction to a minimum of a 38.2% Fibo that meets structure on the lower time frames, like the 4-hour chart, would have a confluence with the 8 EMA.
If bulls step in there, then it might be the making for an onwards daily bullish market to check deeper into the monthly supply zone, with 1,850 the primary port of call.
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