Gold Price Forecast: Technical Forecast Based on MACD Indicator

The price of gold rose steadily for the 5th business session, which is growing more than the dollar in decline. The decline in American production has also continued, with 10 years of hit 3.05, after just 6 days before the increase of 3.20%.

It seems that the Atlanta Fed GDP forecast and the New York Fed GDP forecast both have lowered. High interest rates, and business charges are weighing on confidence. In fact, the National Association of Home Builders Monthly Confidence Index fell to the lowest level of 2 years today.

Gold Price Technical Analysis
Gold prices rose for the fifth consecutive trading session Prices have been pushed through the resistance of the average 1,222 for 20 days now through pre-support. Target resistance on yellow metal is seen at around 1,243 of the highest of October.

The below-average 20-day average support is seen at 1,211 near the average of 50 days running. Short term speed is positive because Fast Stochastic has recently generated a crossover purchase signal and is growing more. The current reading of 56 is between the neutral boundaries.

The Momentum reflected by MACD is ready to become positive because the MACD line is just above to generate a crossover purchase signal. It occurs in the form of MACD line (average zero running 26-day running 12-day) goes above the 9-day average of the MACD line above the MACD signal line.

GOLD MARKET OUTLOOK FOR UPCOMING WEEK

Gold markets initially tried to rally during the day after the jobs number came out stronger than anticipated, but then turned around to fall through the floor again. Now that we are below the $1220 level, and even the $1215 level, looks as if the gold markets will continue to fall. With interest rates set to go higher in the United States and other central bank’s around the world, this will of course continue to weigh upon the value of gold in general. The market is going to reach towards the $1200 level underneath, where it will find a certain amount of support. However, if we break down below there, the market should then continue to go to the $1000 level longer term.

Key Considerations:

It is believed that selling rallies will continue to be the best way to deal with the gold markets, especially with the $1230 level looking so resistive. As soon as we get some type of exhaustive candle, it’s time to start selling yet again. A breakdown below the $1200 level is not only a negative sign, but we should pylon into the short positions. There is no interest in buying gold, unless of course there is some type of major geopolitical issue, such as North Korea flaring up, but less something like that happen, is very likely that strength will be sold going forward as interest rates offer a safer return in the bond markets and other financial instruments. While there is a place for gold in everyone’s portfolio, It’s not believed that buying in this environment is very prudent, but recognized that the $1000 level below is a massive area on the multi-year charts. Selling seems to be the only thing to do.

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GOLD UNDER PRESSURE DUE TO RISING GLOBAL BOND YIELD ENVIRONMENT

The rising global bond yield environment is keeping gold under pressure; however, the losses are being capped at the weekly 50-MA level of $1218.50 ahead of the US NFP release. 

Eyes US data

The US economy is expected to have added 179K jobs in June compared to 138K jobs in May. US average hourly earnings (due at 12:30 GMT) are seen rising 0.3% m/m in June, compared to 0.2% growth seen in May

A strong wage growth figures could yield another leg higher in the treasury yields and weigh over gold. Note that the metal is oversold as per the RSI on the daily chart, thus weak wage growth numbers could see the metal jump back above the 200-DMA level of $1231 levels. 

Gold Technical Levels

As of writing, the metal trades at $1120/Oz. A break below $1218.50 (weekly 50-MA) would open up downside towards $1214.40 (May low) and $1211.73 (Nov 11 low). On the other hand, breach of $1223.50 (5-DMA) would open doors for $1226 (1-hour 50-MA) and $1229.37 (resistance on 1-hour chart). 

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WILL GOLD REACH 1,229.35 AS IT’S ON RECOVERY MODE?

Gold prices on Comex keep the recovery mode intact for the third straight session, although the struggle continues with $ 1230 barrier, despite widespread risk-aversion and a non-event FOMC minutes release.

Gold regains 200-DMA at $ 1225.42

Escalating geo-political tensions surrounding the North Korean missile launch, puts China and Russia against the US, which has weighed down heavily on the investors’ sentiment, keeping the safe-haven bids for the yellow metal underpinned.

Moreover, gold also benefited overnight, as the FOMC minutes lacked any hawkish bias, with the Fed officials divided on when to start the balance sheet normalization process and on a Dec rate hike. The Fed members also expressed their concerns on softening inflation outlook.

Meanwhile, the bulls need a decisive break above $ 1230 barrier for the ongoing recovery to extend further, and hence, traders await the US ADP jobs report and ISM services PMI data for the next near-term direction.

Gold: Technical levels

Higher Side: 1230 (round figure), 1237.25 (10-DMA), 1245.80 (20-DMA)

Lower Side: 1223.37 (daily low), 1216.50 (multi-week troughs), 1210 (key support)

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GOLD RECOVERY FACES UPSIDE TEST FROM HIGHER YIELDS

Outlook on gold prices, in the wake of the latest USD downward spiral and higher Treasury yields.

Key Quotes:

“Gold recovery faces upside test from higher yields

While Mr. Draghi's comments may have been misinterpreted as to the extent or timing of tapering or rate increases, the stronger EUR did help lift gold.

The whipsaw action in the financial markets after ECB officials rushed to clarify Mr. Draghi's comments shows how sensitive monetary officials are to what they may view as overreactions in the financial markets.

Still further EUR gains versus the USD would likely support gold and HSBC forex strategists remain generally bearish on the USD versus the EUR as well against most other currencies.

Gradual USD weakness will likely bolster gold.

Higher yields will constrain further gold gains and while the gold rally has recently come under pressure, we certainty do not believe it is reversed.”

Current Gold Status:

Currently, Gold is trading at 1,246.52, up +0.08%, having posted a daily high at 1,248.29 and low at 1,243.89.

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GOLD GRIPPED BY CONFLICTING FORCES - BBG

Bloomberg carries a piece on gold-price outlook in the coming months, noting that the outlook for the yellow metal remains divided, with the bear trend descending from record high in 2011 still intact, while higher highs, higher lows signal recent rally may have legs.

Key Points:

1. Bearish factors:

• No incentive to hold the precious metal because equities are climbing to records
• Global economy is recovering
• Federal Reserve is so wary of tight labor markets that it has pledged to increase u.s. interest rates further this year

2. Bullish factors:

• Gold is an appealing hedge as long as Donald Trump's presidency remains mired in controversy and legislative gridlock
• And as terrorist attacks and geopolitical tensions heighten risks for other assets

Current Gold Price:

Currently, Gold is trading at 1,252.06, up + 0.12%, having posted a daily high at 1,252.47 and low at 1,249.85.

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THE SELL-OFF IN GOLD APPEARS TO HAVE RUN OUT

The sell-off in gold appears to have run out of steam near 50-DMA support of $1261 even though the probability of a rate hike at the conclusion of the Federal Open Market Committee meeting on Wednesday is 100%.

Is $1300 a distant dream?

Prices topped out at $1296 (June 6 high) as the 10-year treasury yield recovered from the low of 2.13% to 2.22%. The recovery in the treasury yield and the resulting drop in gold ahead of the Fed decision suggests the markets may have price-in a 25 basis point rate hike.

The metal may regain the bid tone and move towards the key psychological figure of $1300 if the Fed delivers a dovish hike - 25 bps hikes and a dovish forward guidance on inflation and interest rates. As for today, the focus is on the US PPI release and NFIB Business Optimism Index.

Gold Technical Levels

The metal was last seen trading around $1266/Oz. A break above $1273 (5-DMA) would open up upside towards to $1277.91 (Apr 25 high) and $1296 (June 6 high). On the other hand, a breakdown of support at $1261 (50-DMA) could yield a pullback to $1245 (100-DMA) and $1238 (200-DMA).

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GOLD UP-TREND KEPT MOVING

Key Points:

- Gold technical strategy: Long-term mixed, Intermediate-term bullish, short-term mixed.

- Gold prices continued in a bullish manner until resistance showed around the prior April-high.

Gold prices were relatively overbought at the time, and with RSI on the hourly chart already having shown a case of divergence, traders would likely want to wait before pressing the bullish approach.

But the up-trend just kept moving until, eventually, price action encountered the prior April-high, at which point bears began to take over. This totals over $80 of gains for Gold prices from the ‘Comey low’, which printed just as news that former FBI Director James Comey was fired, around market close on May 9th. Perhaps more interesting than just the raw movement is the speed with which an aggressive down-trend turned into an aggressive up-trend with a minimum of congestion or gyration near the lows. This was a clean reversal, as if a light switch were flipped to turn the trend from bear to bull in the blink of an eye (or a news report).

But as prices continued to run-higher yesterday, resistance began to show off of the April high around $1,295. Also in this area is a projected trend-line from the previous bullish move in mid-April; the projection of which runs into current resistance.

Collectively, the past six weeks of price action in Gold have produced a V-shaped reversal, with the Comey low serving as the fulcrum point of the reversal; with price action running into a potential double-top formation off of the April-high.

After Mr. Comey’s opening statement was released ahead of tomorrow’s testimony, Gold was offered lower off of that resistance at $1,295, and so far we’ve seen price action follow-thru. However, to confirm that a double top is, in fact, in place, we need to first make sure that what we’re seeing is a near-term top. Traders would likely want to let bears punch through the prior swing-low at $1,277 to prove bearish continuation potential of this recent move off of resistance, at which point the door will be opened for bearish continuation strategies.

Current Gold Status:

Currently, Gold is trading at 1,284.50, down -0.21%, having posted a daily high at 1,287.55 and low at 1,283.73.

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GOLD APPEARS 7-MONTH HIGH

Gold prices retreated from the 7-month high of $1296 in Asia in what appears to be a chart driven move. The metal was last seen trading around $ 1292/Oz levels. 

Bearish RSI divergence on intraday charts

The hourly chart confirmed a bullish price RSI divergence during the overnight trade. The 4-hour RSI is overbought as well. The overbought conditions on smaller time frames could be behind the pullback in the yellow metal from a 7 - month high of $1296. 

Low bond yields, geopolitical risks support gold

Euro zone government bond yields hit multi-week lows on Tuesday. German Bund yields fell to their lowest level in nearly six weeks at 0.262%. The US 10-year yield hit a fresh 7-month low of 2.13%.  The drop in the yields is usually positive for gold. 

Meanwhile, geopolitical risks - diplomatic rift between Qatar and several Arab states, including Saudi Arabia and former FBI chief James Comey's testimony before the US Congress on Thursday - and UK election uncertainty could keep the metal well bid. 

Gold Technical Levels

A daily close above $1300 (zero figure) would open up upside towards $1321.50 (Apr 2013 low) and $1337.34 (Nov 2016 high). On the downside, breach of support at $1279.58 (previous day's low) would expose $1269.50 (May 26 high) and $1259.24 (June 2 low).

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GOLD PRICES RETREATED FROM THE 5-WEEK HIGH

Gold prices retreated from the 5-week high of $1274.09 as the dollar sell-off came to a halt near critical support, although the subsequent recovery has been anything but encouraging.

The USD bears ran out of steam as the Dollar Index (DXY) closed-in on the critical support level of 96.80. Consequently, the yellow metal failed to hold on to the 5-week high of $1274.09 levels.

Eyes US ISM manufacturing data

The traders would want to see if the manufacturing sector added jobs in April. Moreover, the ISM non-manufacturing employment sub index, which is a more reliable advance indicator of job growth, will be released next week.

A strong ISM manufacturing employment sub index would help dollar index post a sharp rebound from the support of 96.80.

Rate hike odds at 91.2%

The US dollar may regain bid tone as we near the June Fed rate decision, given the 25 basis point rate hike looks pretty much a done deal. Thus, in a bigger scheme of things, gold may find it difficult to revisit $1300 levels ahead of the June Fed.

Gold Levels To Consider

The metal was last seen trading around $1268/Oz levels. A break above $1274.09 (previous day’s high) would open doors for $1288.32 (Apr 21 high) and $1295 (Apr 17 high). On the downside, break below $1266.58 (5-DMA) could yield a pullback to $$1261 (10-DMA) and $1256.82 (50-DMA).

Take note of the bullish crossover between 100-DMA and 200-DMA. The daily RSI is flat lined above 50.00 levels, while the MACD bars are no longer gaining altitude, signaling loss of bullish momentum.

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GOLD IS FLAT LINED

Greece issue may have weighed over Treasury yields and AUD/JPY pair, but it hasn’t had any noticeable impact on the classic safe haven asset - Gold. 

The yellow metal trades comatose around $1269/Oz levels. On the contrary, AUD/JPY, which is widely considered as a risk barometer is down 0.50%, while the 10-year treasury yield is down 1.4 basis points. 

What’s behind gold’s poor performance?

The metal’s poor show this Tuesday morning could be due to expectations that Fed would raise rates by 25 basis points in June. Investors could also be waiting on the sidelines to see how the Greek and German bond markets react before pushing the metal higher. 

The metal may find buyers if the German yields drop and the Greek and Periphery yields spike. A strong US personal spending data may play a spoilsport. 

Gold Levels

A break above $1270.40 (May 1 high) would expose resistance at $1273.88 (Apr 19 low) and $1278 (Apr 25 high). On the other hand, a breakdown of support at $1265 (May 18 low) could yield a pull back to $1256 (50-DMA) and $1247.81 (May 24 low).

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GOLD PRICES ARE TRADING FLAT LINED

Gold prices are trading flat lined around $1268/Oz levels, the highest level since May 1 as the upward revision of the US Q1 GDP failed to boost the treasury yields.

Breakout Considerations:

The metal was largely restricted to a range of $1245-$1263 levels since May 18 before the prices rose to a high of $1269 levels on Friday.

US Q1 GDP was revised higher to 1.25 from the initial estimate of 0.7%. However, the upbeat GDP was overshadowed by a more forward looking, durable goods orders number, which fell 0.7% in April, following a 2.3% rise in March.

Orders for capital goods, excluding aircraft and military equipment, were flat for the second straight month. The drop in the corporate spending made sure the 10-year treasury yield remained flat lined around 2.24%.

Consequently, the metal jumped to a one-month high of $1269 levels. The US markets are closed today; hence the trading volumes could be low. The hawkish comments from Fed’s Williams earlier today failed to move gold or related markets.

Gold Levels To Watch:

A break above $1270.40 (May 1 high) would expose resistance at $1273.88 (Apr 19 low) and $1278 (Apr 25 high). On the other hand, a breakdown of support at $1265 (May 18 low) could yield a pull back to $1256 (50-DMA) and $1247.81 (May 24 low).

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GOLD CLOCKS 3-DAY RISE

The Manchester explosion and the resulting risk-off pushed gold to a three-day high of $1263.46 levels.

The session high almost coincides with the critical 61.8% fib retracement of the April low and the March high - $1264. 50.

The Greater Manchester Policy is treating the explosion as a terrorist incident until they know otherwise. UK PM May has condemned the blast and said they are working to establish the full details of the incident.

Meanwhile, Trump administration has proposed major cuts to social spending program and massive tax cuts that will boost the economic growth. However, the plan is likely to be rejected by Congress. Hence, the proposal has not had any impact on the yellow metal. Furthermore, the CME FedWatch’s June rate hike probability stands unchanged at 78.5%.

The metal may remain well bid and could jump above $1264.50 (61.8% Fib R) if the European stock markets react negatively to Manchester incident.

Gold Levels To Watch

The metal was last seen trading around $1262/Oz. A break above $1264.50 (61.8% Fib R of Apr low - May high) would open doors for $1274.07 (Apr 19 low) and $1278.11 (78.6% Fib R of Apr low - May high). On the downside, break below $1259.50 (session low) could yield a pull back to $1252.53 (50-DMA) and $1243.65 (100-DMA).

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IMPLICATIONS OF GOLD WITH WEAK REFLATION

As a reminder, reflation started to attract the attention of investors at the end of 2016 and was based on two pillars:

• Trump’s rally, i.e. rising expectations about the fiscal stimulus provided by the new administration, and
• Accelerating global inflation and economic growth. As a result, interest rates surged, while the price of gold plunged.

The problem is that both drivers of reflation trade have weakened recently. The failure of Trump to repeal and replace Obamacare undermined markets’ confidence in the quick and smooth implementation of the new administration’s pro-growth agenda. Some argue that the Trump care’s failure is actually a good thing because now the administration will quickly shift to the subject of tax reform. However, such a line of argument is totally wrong as it overlooks significant divisions among Republicans and the fact that healthcare reform was supposed to reduce government expenditures, enabling or at least facilitating the tax cuts.

Of course, the reflation trade is something bigger than Trump’s rally, as the uptick in economic activity started significantly before the U.S. presidential election.

GOLD ANALYSIS

The price of gold (left axis, yellow line, London P.M. Fix), the U.S. nominal interest rates (green line, right axis, as the 10-year nominal treasury yield, in %) and the real interest rates (red line, right axis, as 10-year inflation-indexed treasury yield, in %) from January 2016 to April 2017.

Given the negative correlation between the real interest rates and the gold prices, the recent pullback strengthens the bullish outlook for the price of gold. Moreover, the bond market is more liquid than the stock market, so treasuries are often ahead of equities. It implies that we may see some spring corrections on Wall Street, which should be positive for the yellow metal.

Let’s check other key gold price drivers, which are less bullish. As one can see in the chart below, credit spreads are very low. It indicates high economic confidence, which is bearish for gold. There was a pullback in the U.S. dollar in 2017, but greenback remains in the upward long-term trend – partially because the divergence in monetary policies between the Fed and other major central banks has been widening – which is also negative for the price of gold

Therefore, gold drivers send mixed signals. The U.S. dollar and credit spreads remain bearish, while the real interest rates have turned to be bullish recently, as the Trump rally has definitely softened. To be clear: it’s too early to herald the end of reflation, as the improving manufacturing sector in China should be enough to support the reflation trade in the medium term. There will be ups and downs, but the trend should be higher. What we are saying is that the macroeconomic outlook for gold has recently improved on the margin, as the reflation trade lost Trump’s leg.

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GOLD COULD BREAK THROUGH USD1300/OZ THIS YEAR

Gold this Friday, noting that the yellow metal is likely to surpass $ 1300 mark, even without ‘safe-haven’ buying.

Key Considerations:

“Safe haven buying has provided strong support to gold prices over the past six months. However rising geopolitical risks in the US and elsewhere are likely to propel prices even higher, despite the spectre of a rate hike in the US next month. We see gold holding above USD1250/oz in the short term, and an increasingly possibility of it breaking through USD1300/oz this year if the political situation in the US worsens.”

“Even without the support of safe haven buying, we still see an environment conducive to higher gold prices. Much has been debated about the impact of rising US interest rates on gold. However, we don't see this as a hindrance over the next 12 months. In fact, over the past seven rate hikes cycles (going back to the 1970s), gold has pushed higher in all but one case. Moreover, gold has outperformed in the cycles where interest rates were increasing relatively slowly.”

“We are also seeing signs of an improvement in the physical market. While coming from a low base, physical demand in India and China have rebounded sharply in recent months. The issues around demonetization in India appear to be abating, while a sharp pickup in gold imports into China suggests previous constraints have also eased.”

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5 REASONS PRICE OF GOLD MAY RISE IN 2017

The gold market observes a steady charge rise in recent years. Clearly, factors affecting the price of gold involve the basics of aesthetic and precautionary gold demand.

The gold market price has dramatically accelerated during the last decade; the gold price has made this yellow metal an attractive trading asset. The demand for gold has especially increased in the Asian countries such as Malaysia, Singapore, China, Hong-Kong etc.

REASONS CONFIRMING THE RISE IN GOLD PRICE

Higher inflation expectations:

As per the analysis, inflationary guidelines adopted by Singapore and US are in all likelihood to increase speculative flows into ETFs related to gold.

In 2017, gold is mainly pushed by using better fiscal spending among rising rates, which might sooner or later cause inflation higher.

Markets have a tendency to save their capital in gold with a purpose to hedge against inflationary stress.

Ticking up of the stock market:

The stock market has returned excellent yields in the years following the Great Recession, and monetary policy has allowed investors the ability to lever up at relatively cheap rates of interest.

In other words, there seems to be little room for gold in a levered portfolio of income-producing assets at this time.

Fall in the Price Of Dollar:

Gold and dollar each are worldwide. Gold and dollar rate are inversely proportional. whilst Dollar’s rate fall people will not buy gold at that point because they need to pay more dollars to buy gold and when the trading price will become high, traders will be inclined to buy gold at that time due to the fact they can pay fewer dollars.

Rising Crude Oil Prices:

Normally the rates of gold and crude oil are associated. The Higher price of crude oil in commodity trading Malaysia market might translate into higher prices of gold.

Geopolitical unrest:

Geopolitical issues always raise the price of gold. As in 2017, geopolitical tensions over North Korea and French Presidential election show a drastic change in the gold rates and hence increase the demand for gold.

BOTTOM LINE:

Being a gold trader it’s important to know the condition of gold market and price of gold. Rising gold could be both beneficial and leads to loss depend totally on your strategy and decision making. For proper decision, you should analyze the market properly.

To know our latest recommendation or gold tips along with stop loss and target price visit www.mmfsolutions.sg

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