Gold forecast: is it time to turn cautious on XAU/USD?
Short-term upward momentum in gold remains strong; the yellow metal appears set to test major hurdle at 2069-2072 and what are the factors and levels to watch out for?
Gold technical outlook - neutral
Gold’s rise to a new 13-month high reaffirms that the near-term trend remains up on hopes that the US Federal Reserve is nearing the end of the tightening cycle. The yellow metal is now approaching one of the strongest resistance levels that it has faced in months.
US macro data in recent weeks have been underwhelming, as reflected in the Economic Surprise Index which has fallen sharply since the end of March.
Last week, US producer prices unexpectedly declined in March, solidifying the view that broader price pressures are subsiding (see inflation chart). This followed a subdued US CPI report on Wednesday and the dovish tone of the minutes of the FOMC meeting in March, boosting hopes that the Fed is nearing a pause in its rate-hiking campaign.
Markets are pricing in about a 34% chance that the Fed will pause at its May meeting, according to the CME’s FedWatch tool.
US core inflation measures
In recent weeks, gold has been boosted by safe-haven bids amid the turmoil in the banking sector and the growing view that US policy rates are about to pivot.
Expectations of lower policy rates combined with still-elevated inflation (at least above the Fed’s 2% target) would imply lower real rates and higher gold prices (as gold is inversely related to real interest rates).
As a result, speculative positioning in gold has increased.
XAU/USD monthly chart
On technical charts, gold is approaching the 2020 and the 2022 highs of 2069-2072. As noted in the previous update, momentum on higher timeframe charts hasn’t picked up to the extent of the rise in gold prices (see the monthly chart).
XAU/USD 240-minute chart
Still, the trend on the daily charts continues to be up, raising the prospect of a test of the 2069-2072 barrier (see colour-coded candlestick charts based on trend/momentum indicators).
On the downside, there is key converged support at 1970-1996, including the 89-period moving average on the 240-minute charts and the April 10 low. For the short-term upward pressure to fade, the yellow metal would need to break below the 1970-1996 area.
XAU/USD daily chart
IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.
The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.
No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk. Please see important Research Disclaimer.
Please also note that the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.
Start trading forex today
Trade the largest and most volatile financial market in the world.
- Spreads start at just 0.6 points on EUR/USD
- Analyse market movements with our essential selection of charts
- Speculate from a range of platforms, including on mobile
Live prices on most popular markets
- Forex
- Shares
- Indices
See more forex live prices
See more shares live prices
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.
See more indices live prices
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.
