Gold Forecast: USD 1212 –1190 Range game to extend

Gold prices have been wavering around USD 1200/Oz – pyschological barrier duiring the past month with the upside capped around USD 1200 levels and the bears restricted to around 1180 levels. Narrowing down to the past one week, gold prices have been trading in a slim range locked between 1190 and 1210 band. Gold prices have stood resilient despite high volatility witnessed around the US dollar against the back drop of the impeding debate over the timing of Fed’s rate lift-off.

In today’s trade in running, gold prices erased losses and trades muted circa 1202 levels, having psoted day’s high at 1204.30 and day’s low at 1197.80. The precious metal extends its side trend with every dip a renewed buying opportunity, bringing back gold above the 1200 marker. The upside in the prices seem muted despite broad US dollar weakness with the DXY in red to the tune of -0.37% at 97.84 at the moment.

Although gold did manage to close above the key 1200 threshold on weekly basis, the metal has failed to garner further momentum. Hence, evaluating the recent trend in gold prices, we expect gold prices to keep the same USD 1212-1190 range within this week as markets remain torn apart amid mixed fundamentals.

Looming Greece Concerns

Greece is currently in talks with its international creditors about the necessary reforms Athens needs to implement to get the much-needed final tranche of its second bailout so that the cash-strapped nation can meet its obligations. In case if Greece defaults, there is more likelihood of a Grexit which may disrupt the financial markets.

The pressure mounts ahead of Friday’s Euro group meeting, however, latest update reveals that no reforms list will be presented by Greece at the upcoming meeting in Riga on Friday. Also, ECB will continue to provide funds to Greece’s banks so long as they are solvent. These onoging talks surrounding Greece is likely to buoy the gold as geopolitical tensions boost the safe-haven appeal in gold.

Central Bank Buying

Recently, Russia, the fifth-biggest holder of the metal, returned to buying gold in March after taking a break in January and February.

The nation increased foreign reserves of bullion to 39.8 million ounces, or about 1,238 metric tons, as of April 1, compared with 38.8 million ounces a month earlier, the central bank reproted on Monday. The 30-ton purchase was the most since September.

Relatively stronger USD

Though the US dollar has eased in the last couple of session on a corrective slide, the underlying bullish momentum is expected to continue on the back of upbeat US fundamentals. Last Friday, US CPI gained 0.2% month-on-month during March, following the same growth seen in February. The Thomson Reuters/University of Michigan's preliminary April reading of its Index of Consumer Confidence booked 95.9 points, up from 93.0 seen in March. Later in the New York session, the US house prices index is expected to tick higher to 0.5% from 0.3%, while existing house sales are predicted to jump to 5.03 million, from 4.88 million previously.

However, the major factor that may provide fresh cues on further US dollar moves will be durable and core durable goods to be published on Friday.

Meanwhile, according to the CFTC and Rabobank's research, USD longs picked up ground again last week, having been consolidating for the previous three weeks.

Gold capped ahead of Fed Meeting 

Investors remain cautious and refrain from creating fresh positions in gold ahead of the Federal Reserve’s (Fed) April 29 meeting , with the Fed expected to keep a slightly hawkish tone, favouring the USD bulls. Moreover, with recent slightly better than estimates key US CPI print, Fed rate hike talks this June may be back on the table, pushing treasury yields across the curve higher. This may dampen gold’s appeal as an alternate higher yielding asset.

Technically, on the daily chart, gold prices are stuck in a pennant formation with upside capped by 200-DMA located at 1212.50 levels. The 50-DMA located at 1190 acts as a critical support. More so, the daily RSI wavers around the mid lines indicating indecisiveness between the bulls and the bears. Hence, in the week ahead gold prices may continue to trade in a narrow range between USD 1212-1190 levels correlating with the above mentioned fundamentals.