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Gold bears creeping back to the plate and target a break below $1,280

  • Gold has started to consolidate around the pivot and between S1 and R1 as markets go into wait and see mode ahead of the BoC on Thursday and following a number fundamentals that are starting to wear thin.
  • Gold is currently trading at $1,284, down from a high of $1,290 and up from $1,279 the low for the session. 

Gold has started to lose some appeal as the greenback makes back some ground lost towards the 96 handle in the DXY, correcting from the 95.60's. Meanwhile, stocks have been in a steady bullish trend since the DJIA  bottomed at the 23.6% Fibo of the December downtrend on the 3rd Jan. Consequently, gold futures have slipped this Tuesday with February gold on Comex losing around $4.00, or just over 0.3%/oz.

However, bears are not out of the woods yet, and there is still plenty to play for in targeting through the 1300 psychological level given the number risks to the financial and commodities markets from both an economic and political standpoint. Risk appetite has returned, but last week's flash crash and the message from Apple's CEO should be a warning to bulls, and it should be noted how fragile the optimism in markets is. At the same time, the dollar will remain vulnerable if the Fed dovish sentiment sticks around for much longer.

Looking ahead this week

We have a wave of FOMC speakers later this week, (Powell Thursday), and US CPI on Friday. We also have the BoC tomorrow which could well outline the fragility of the global economy and bring an upside bias to the safe havens once again, at least in the near term. On the other hand, continued upbeat tones in data and central bankers will undoubtedly be welcomed by battered investors who will likely be enthused to get back involved on the bid, to the detriment of gold bugs. 

Gold levels

Technically, gold has failed around the 61.8% Fibo retracement of the 2018 decline to date and is unable to find conviction at the 1300 level. The price is testing the support of the 20th May Fractal and eyes have turned back to 1280 and below. A break there opens a runway down to the 2018 50% Fibo area at 1262. RSI is now headed back below the overbought zone while MACD continues to decline.

 

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