Gold Closing A Bullish Week As US Consumer Softens
Gold turned bullish since November and made some decent gains until Fbeurary, following the seasonal pattern. However, it stumbled on a more hawkish path for the FED as the US economic data showed improvemrnt, which also pushed bond yields higher. Despite this, Gold has been holding well on bad days and showing strength during bullish ones. It is currently trying to close above $1,855 after hving started the week ataround $1,810.
Another factor that is be contributing to Gold’s recent bullishi performance is sovereign demand. It has been noted that this demand has increased since Q3 2022, with countries such as China and Russia adding to their reserves. Other countries that are unfriendly with the US may also be turning back to Gold after seeing Russian reserves confiscated. However, these flows are competing against more attractive bond yields than what was seen in the 2010s.
Technically, there is something noteworthy about Gold’s performance last week as most assets traded sideways, while XAU/USD bounced off the 100 SMA (green) which has been acting as support in previous years as well. March is historically a poor month for Gold but bulls should not ignore it as itmight be heading for $2,000 if the economic data weakens in the US, such as the soft consumer confidence numbers we saw this week.
Gold H4 Chart – Three MAs Have Been Broken
Smaller MAs have turned into support on this timeframe
On the H4 chart above, Gold was finding solding support at moving averages during retreats, particularly the 100 SMA (green). Then these moving averages turned into resistance as the trend changed, but since early last week the pressure has been to the upside and most moving averages have been broken. Now, buyers are finding support at these MAs, so, perhaps the trend might be shifting again in March.
In summary, Gold has been performing well despite a more hawkish FED and higher bond yields. Sovereign demand may be a factor contributing to its recent success, but it is competing against more attractive bond yields. Although March is not a great month for gold historically, it should not be written off entirely as it could still make another attempt at reaching $2000 if there are more soft economic readings.
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