As any gold bug would tell you, last year’s fourth quarter was a strong one, with the yellow metal gaining nearly 8% from October through New Year’s Day. The good times carried over into mid-February, when gold peaked near $1350, but the price action over the last two months suggests that a major top may have formed.
As the chart below shows, the first quarter’s price action formed a large “rounded top” (or a modified head-and-shoulders pattern). This pattern was preceded by a triple bearish divergence in both the RSI and MACD indicators, a clear sign that bullish momentum was waning through January and early February; now both indicators are in bearish territory.
With today’s 1%+ drop, the yellow metal is breaking to new year-to-date lows below the “neckline” of that pattern near $1275. A confirmed breakdown would project a “measured move” objective just above the $1200 level, with additional support near the October lows at 1181:
From a fundamental perspective, the global shift toward easier monetary policy should act to support gold, though to the extent it’s driven by fears of an economic slowdown, it may be partially offset by decreasing demand for gold jewelry. As always, real interest rates continue to have an inverse relationship with gold, so continued signs of a slowdown in global inflationary pressures would help confirm the bearish technical picture.
This research is for informational purposes and should not be construed as personal advice. Trading any financial market involves risk. Trading on leverage involves risk of losses greater than deposits.
Recommended Content
Editors’ Picks
EUR/USD extends losses on dovish remarks from ECB members, trades near 1.0780
EUR/USD continues its downward trend for the fourth consecutive day, driven by a stronger US Dollar influenced by the hawkish market sentiment surrounding the Federal Reserve and expectations of prolonged higher interest rates.
GBP/USD trades sideways above 1.2600 amid quiet session
The GBP/USD pair trades sideways around 1.2622 during the early Friday. The market is likely to be mute in light trading on Good Friday. Later in the day, the US Core Personal Consumption Expenditures Price Index will be released.
Gold ends Q1 2024 at record highs, what’s next?
Gold is sitting at an all-time high of $2,236, lacking a trading impetus amid holiday-thinned conditions on Good Friday. Most major world markets, including the United States are closed in observance of Holy Friday, leaving volatility around Gold price highly subdued.
Ripple's move above this key level could trigger nearly 50% rally for XRP
Ripple price has overcome a critical resistance level and flipped into a support floor on the weekly time frame. This development happened while XRP tightly consolidated for roughly 250 days. As this coiling up comes undone, investors can expect XRP to kickstart a massive rally.
Will they won’t they cut rates is the question of Q2?
There has been some significant push back from Fed and Bank of England members around the timing of rate cuts, and the Bank of Japan still haven’t physically intervened in the FX market to stem yen weakness although they are threatening to do so.