Gold Price Forecast: Bounces on global gloom forming bull hammer

Gold has bounced back strongly from six-week lows on global growth worries, forming a bullish hammer on the weekly chart. 

As of writing, the yellow metal is trading at $1,300, representing 0.45 percent gain on a weekly basis. 

A bounce from lows near $1,280 was overdue as technical charts were reporting bearish exhaustion in Asian session today and the case for a corrective rally to $1,300 was bolstered further by risk aversion. 

The European Central Bank (ECB) kept rates unchanged on Thursday but pushed out rate hike to 2020. The central bank also revised growth forecasts lower and announced new loans for banks. 

The dovish turn ended up confirming market fears of a deeper slowdown in the 17-nation currency bloc. As a result, both the European and US stocks fell. The risk sentiment was also dented by a New York Times report stating that US-China negotiations are yet to finalize key points like when to remove tariffs and ensure compliance of a potential trade deal. 

Asian stocks opened on a weak note today, tracking overnight losses on Wall Street and extended the decline after the sharp drop in China's exports highlighted worsening demand conditions in the global economy. China's imports also fell, validating argument put forward by many that consumption is unlikely to compensate for the drag to GDP from trade. 

As a result, the European equities remained under pressure today. Further, the US non-farm payrolls failed to restore risk sentiment, allowing US stocks to print losses for the fifth day. 

The risk aversion may worsen next week if China's consumer price index, scheduled for release over the weekend, prints above estimates. That would complicate matters for the Chinese authorities, who have already ruled out flood-like stimulus. Also, a weaker-than-expected would only boost fears of a deeper economic slowdown, sending gold higher. 

Apart from China data, the focus would also be on the US retail sales, consumer price index and durable goods orders. A dismal data will likely push up the odds of Fed rate cut, sending dollar - gold's biggest nemesis - lower across the board. 

All this could yield a strong follow-through to this week's bullish hammer in gold's weekly chart. 

Weekly chart

The immediate bearish outlook stands neutralized, courtesy of the bullish hammer. That said, a bearish-to-bullish trend change would be confirmed if prices close well above $1,300 next week. That looks likely courtesy of global risk aversion and would open the doors to re-test of recent highs above $1,340. 

Daily chart

As seen above, the 10-day MA is crossing the 50-day MA from above. The bearish crossover would gain credence, sending prices back to $1,280 if prices struggle to find acceptance above $1,300 in the first half of the next week. 

The bounce from $1,280 would gain credence if prices close above $1,300.