Key Points:
- Gold rallies from supporting trend line.
- Key inflection point looming with price converging on 100 and 50 MA’s.
- Watch for a bounce back towards $1263.48 an ounce.
The past 24 hours has seen gold rally to a key medium term inflection point as the metal’s price action closes in on a bullish cross of the moving averages. It would appear that the metal might have finally discovered some key support which, unsurprisingly, appears to have been right on a supporting trend line. Subsequently, we could be about to see some resurgence in gold prices in the coming days.
In fact, price action on the daily charts is potentially spelling out the metals' near term trend. Price appears to have discovered some support around the $1214.09 an ounce mark and, subsequently, has rallied over the past week. At the same time, the 100 and 50MA’s are converging at the same location and something is definitely getting ready to break.
In addition, the RSI Oscillator has finally clawed its way out of oversold territory and is now trending higher and still has plenty of room to run on the upside. Subsequently, there are plenty of technical reasons to suggest that the metal is about to break above the 100 day MA and start a sharp rally towards our interim target of $1263.48 an ounce.
Also, from the fundamental perspective, there is some weakness becoming apparent within the U.S. domestic economy of late. In particular, the latest round of Building Permits and Housing Starts proved to be relatively flat and, subsequently, saw sentiment swinging against the greenback. Additionally, the Q1 GDP results proved relatively disappointing and there is some evidence of sliding consumer sentiment whilst inflation is still largely absent.
Subsequently, there is a building case for the Federal Reserve to potentially hold off on any further rate hikes until we have the Q2 GDP results to review. This obviously bodes well for precious metals markets given that much of the downward pressure has been the pricing in of the central bank’s forward guidance on rates.
Ultimately, gold is likely to undergo resurgence in the coming session given the aforementioned technical and fundamental factors. Currently, the air is coming out of the dollar and we should start to see capital flows back into safe havens given the rising political risk within America. Subsequently, watch for a sharp break above the 100MA before a steady bid takes the metal higher towards our target at $1263.48.