$4,000: Just a pause, not the end of Gold's decline

Gold is rebounding at the end of the week after a correction in the odds of two key Fed rate hikes this year. Nevertheless, the price is falling for the fourth consecutive week. Since the second half of the week, bears have been relentlessly trying to push the price below the psychologically significant $4,000 mark but eased their grip on Friday afternoon. At the same time, the long-term moving averages favour sellers, as a ‘death cross’ is looming (when the 50-day moving average falls below the 200-day moving average), reinforced by the fact that the price is trading below this cross. On the weekly charts, attempts to push the price back above the 50-week moving average have failed. However, this is also the price support zone from the end of last year, so we can expect a fairly fierce battle around the current level.

It is also worth noting how the narrative for gold’s price movements has changed. Previously, the escalation between the US and Iran triggered downward price movements, with a clear inverse correlation between oil and gold. But it has now become apparent that both assets can move in the same direction – downwards.

However, we must also consider an alternative scenario, in which, since the end of January, the price of gold has been correcting following three years of growth, reaching the 61.8% level—a classic Fibonacci support level. Under this scenario, we should see consolidation followed by a reversal to the upside, with the first stage being a recovery to peak levels around $5,600, and the second stage a rally to $8,000 as part of an extension to the 161.8% level. We nevertheless view this undoubtedly inspiring scenario as less likely, given the history of previous similar price booms and crashes over the last half-century.