Gold Set for A Breakout As the Range Between MAs Gets Narrower
Gold has been bouncing off the 200 SMA but has found resistance at the 100 SMA on the daily chart, which are closing in
Gold has been finding support around the 200 SMA (purple) on the daily chart, where it has been rebounding twice, as it pushes the lows higher. But, the highs have been getting lower as well, and in the last two months, the 100 SMA (green) has turned from support into resistance.
The price was heading toward $1,950 last week until it was knocked back down by the more hawkish-than-expected FOMC Dot Plot. There is still a lot of uncertainty in the market about interest rates since the FED is striving for a soft landing and is being careful about tightening, but the sturdy economy and solid labor market may support the FED’s decision to do more than expected. This uncertainty has resulted in a rangebound price action in XAU/USD, with high readings prompting selloffs and weak economic figures causing rallies.
On the daily chart, we can see that GOLD remains trading in a range between two moving averages, which is getting narrower, as the market waits for a big trigger to start moving sustainably in a specific direction. The daily chart provides no clues since the price just goes sideways and the moving averages are heading to a meeting point. However, the recent rejection from the $1,928 zone implies that we may return the important $1,900 level and even lower to the $1,893 support.
We were already short on Gold since last week and closed the signal in profit yesterday after the tumble lower. Gold’s positive correlation with the US Treasury yields has weakened in recent months; while Gold used to track US yields closely, that relationship has broken for the majority of this year. US rates have risen significantly, but Gold has been unable to profit on the bullish momentum in the bond market. S0, the bearish case is a bit stronger and as a result we will try to sell bounces higher.
Gold XAU Live Chart
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So should we anticipate more bearish movement?
Hi Brian, as fundamentals stand right now, yes. Unless US consumer and spending starts giving signs of weakness, since that is what the FED is looking at mostly.
Between the demand zone at of 1903 and 1910 on the daily charts, is it safe to make an entry position anticipating rejection at 1903?
The US New Home Sales and New Home Sales came in weak, which should be bullish for Gold, but the rebound has faded already, so the pressure remains to the downside.
I agree, what do you think is making gold to resist bulish movement despite a negative homes sales report?