Gold Price Forecast: Downside exposed ahead of the Fed
|Gold (XAU/USD) could drop to $1,286 (ascending weekly 50-MA) if the Fed revises higher its neutral rate.
The options market is bearish on gold
- The XAU/USD one-month 25 delta risk reversals are being paid at 0.525 XAU puts - level last seen in late December.
- Also, the chart shows a head-and-shoulders breakdown, meaning the implied volatility premium for XAU puts (sell gold) will likely continue rising in the near future.
Daily chart
- A series of lower highs, as represented by the falling trend line, indicates the bear grip has strengthened.
- Bearish 5-day MA (moving average) and 10-day MA crossover suggests short-term bearish setup.
Weekly chart
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- Last week's drop confirmed bearish doji continuation.
- 5-week MA and 10-week MA are biased bearish, having witnessed a bearish crossover in late February.
- The last week's candle closed below $1,316.56 (38.2 percent Fibonacci retracement of Dec-Jan rally), opening doors for a sell-off to $1,286 (61.8 percent Fibonacci retracement of Dec-Jan rally).
View
- The metal looks set to test $1,286 and could possibly break lower towards $1,260 if the Fed lifts neutral rates (revises 2019/2020 rate forecasts higher).
- On the higher side, only a close above $1,330 (50-day MA) would abort the bearish view and allow a re-test of $1,340.
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