On the daily chart below, we can
see the incredibly strong and fast rally in gold that started as the Silicon
Valley Bank failed. The fears around the banking sector caused not only a
flight to safety into gold, but also a fast repricing lower in interest rates
expectations that brought down real yields and ultimately favoured the precious
metal.
As the fears faded due to the
emergency actions taken by the central banks, the buying momentum started to
weaken and led to a correction. The rally was anyway overstretched as signalled
by the distance between the price and the blue short term moving
average and the divergence with the MACD.
On the 4 hour chart below, we can
see that the break below the trendline gave the sellers some control.
The moving averages crossed to the downside as the selling momentum
intensified. It may be an early signal of a change in trend, but the next
direction will be decided by the FOMC
decision and the economic data in the next few weeks. It’s likely that we will
see another selloff in case the Fed sounds hawkish, while a dovish outcome
would give the buyers again control.
On the 1 hour chart below, we can
see a clear setup for both buyers and sellers. The buyers will want to see the
price to break above the trendline to start piling in and extend the rally
towards new higher highs. The sellers, on the other hand, are likely to lean on
the trendline where there is confluence with a 38.2% Fibonacci
retracement level and the red long period moving average.
