Last week gold was testing an area of support just a tad north of $1,800. This area had held up prices in February and March this year, and had acted as significant resistance back in August 2022. Last week there didn’t appear to be much going in gold’s favour. But as it traded sideways in a band between $1,830 and $1,810 we noted that the MACD on the four-hour chart had turned up. While noting the potential for a continuation of the decline, we thought this could signal the possibility of a bottom. Since then gold has had a decent rally which has taken it above $1,870.
So, does that mean that gold has found a bottom, and a base from which to go higher? It’s possible. Fundamentally, investors can argue that it was oversold, that now is a good time to diversify into unloved ‘safe havens’, given the current reluctance for investors to pile into bonds, and that the US dollar has pulled back from its recent highs, supporting the case for gold. From a technical viewpoint, the MACD has turned higher on the daily chart as well as the 4-hour, and the straight line rally from last week has taken the metal a long way above significant support.
What happens next is crucial. Given the rapidity of the rally, a pullback seems necessary to reset prices and find other support levels. But if we see a sharp return towards $1,800 then it may be that gold bulls will need more patience.
So, does that mean that gold has found a bottom, and a base from which to go higher? It’s possible. Fundamentally, investors can argue that it was oversold, that now is a good time to diversify into unloved ‘safe havens’, given the current reluctance for investors to pile into bonds, and that the US dollar has pulled back from its recent highs, supporting the case for gold. From a technical viewpoint, the MACD has turned higher on the daily chart as well as the 4-hour, and the straight line rally from last week has taken the metal a long way above significant support.
What happens next is crucial. Given the rapidity of the rally, a pullback seems necessary to reset prices and find other support levels. But if we see a sharp return towards $1,800 then it may be that gold bulls will need more patience.