Dollar and Treasury Yields’ weakness helped Gold futures to rally last week. Dollar Index (DXY) has broken below its h4 MA200 for the 1st time since February 26th. It was a real surprise that the bevy of good news has not pushed Treasury yields higher at all. Moreover, they’ve done the opposite, falling about -8 basis points at the end of the week. In fact, the US10Y has broken below its h4 MA200 for the 1st time since November 5th.
Last week was just a massive source of positive news. First of all, big banks reported better than expected Q1 earnings. Moreover, all of the data shows the U.S. consumer has reduced debt, saved money, and is ready to spend. Retail Sales in March shot up nearly +10%, the largest gain since last May. The government last week reported that first-time unemployment claims hit their lowest levels since the pandemic.
And with all that we see US10Y falling and Gold rising. There is only one explanation for that – inflation concerns. Gold always takes off a month or two prior to stock market pullback. Not sure how it will play this time. As we still see mixed signals in SP500.
So, did Gold start a new wave to the upside? It is very possible. We have a bullish fundamental setup. It is not that strong, but still… The Intermarket Forecast is clearly bullish. Cycles are approaching a bottom. They are not there yet, but quite close to the reversal point. Also, based on my evaluation model Gold is very close to undervalued levels. I would like to see extremes in commercials positions (Commitment of Trader Reports) to confirm the signal. But there is nothing interesting in COT yet.
Gold technical analysis
Gold closed above daily MA50. That is very positive. However, it is too early to talk about a new uptrend. GC has to break and sustain above 1800. I believe it will be not that easy to do despite Golden Cross. Moreover, 1780 – 1800 (and even 1816) is a massive resistance zone. Likely we will see a pullback to h4 MA50 from this range. So, trade accordingly.
We have an interesting picture on the weekly time frame. Gold is flagging. Previously we had similar patterns and all of them played very well. It’s not a 100% rule. But it is something you have to be aware of. First, we have to see a qualified break out above the trend line of this pattern. If that happens, we can look for a swing trade.
Wishing you a great week!
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