- Gold bears are out and a break of $1,800 opens risk to the $1,780s.
- Bulls would argue that real rates will increase only modestly.
Gold can be analysed from a bearish perspective as per the following top-down analysis. This rhymes with the hawkish signals coming from the Federal Reserve and the market expectations suggesting a March Fed funds hike is imminent. Investors have extended short positioning and sold longs with yields across the curve moved convincingly higher.
Gold monthly chart
The monthly W-formation is a bearish reversion pattern where the neckline comes in at $1,783 with a confluence of the dynamic support line.
Gold weekly chart
The weekly chart is showing that gold is struggling to break the prior double highs and a failure again last week makes for a bearish triple top.
Gold daily chart
The daily chart is pressuring the W-formation's neckline near $1,815 which guards a deeper test of the bullish impulse's range between $1,782.93 and $1,828.11. The low meets the trend line support, so a break there would be significantly bearish.
Gold 4-hour chart
The 4-hour chart sees the price on the back foot but a correction could be on the cards for the open in what would be a retest of the $1,821 structure. No matter which way, the outlook is bearish and there are prospects of a move into the depths of the $1,800s to meet the $1,801 prior low. However, a break above $1,829 and a close in the $1,830's would negate the bearish outlook.
Additionally, the Federal Reserve chairman Jerome Powell was telling the Senate Banking Committee last week that he is keen to fight inflation, but he also implied a very measured course of action. As analysts at TD securities argued, ''this implies that real rates will increase only modestly and that gold may jump higher as shorts cover.'
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.