Gold rallied to a fresh record high on Friday and the gains continued after the weekend as precious metal surged after the launch of new week's trading on futures market. The price was up over 3.5% at one point and briefly traded near $2,150 per ounce mark. Rising expectations for an imminent rate cuts as well as gains on US bond market (drop in yields) were the driving force behind the surge. However, all of today's GOLD gains have been erased already, and now the precious metal is trading lower on the day.
Gold started to erase gains as bonds began to retreat. The US 10-year yield sits near 4.24%, around 5 basis points above Friday's close. Nevertheless, story behind the move higher is unchanged with rate cuts being the more likely to be Fed's next move than another rate hike. Money markets are fully pricing in the first 25 basis point rate cut for FOMC meeting in May 2024 but pricing for March 2024 meeting already hints at more than 50% chance of such a move being delivered at end-Q1.
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Create account Try a demo Download mobile app Download mobile appMoney markets fully price in a 25 basis point rate cut for Fed's meeting in May as well as seen an over-50% chance of a rate cut being delivered as soon as March 2024. Source: Bloomberg Finance LP
Taking a look at GOLD chart at weekly interval (W1), we can see that price spiked above the $2,070 resistance zone today but all gains were later erased. As a result, a gravestone doji candlestick pattern can be seen building up on the weekly interval. Such a pattern hints at a possibility of a bearish reversal on the market. Given that it was painted in an important resistance zone, marked with previous all-time highs, traders should watch closely how gold performs this week. Finishing the week below current levels may lead to painting of a bearish candlestick pattern which is considered to be more reliable predictor of bearish trend reversals than candlestick doji. Should a reversal occur and price starts to pull back, the first major support zone to watch can be found in the $1,925 per ounce area. A psychological $2,000 area may also offer some short-term support.
Source: xStation5
