Gold has stabilized at the US$ 2,020 level in anticipation of Tuesday’s trading session, following a decline on Friday. This appears to be due to fluctuations in risk sentiment influencing the valuation of this valuable commodity.
The Federal Open Market Committee’s decision to increase its target rate by 25 basis points to 5-5.25% has resulted in a rise in Treasury yields throughout the curve. This development is observed across various durations.
The 2-year note benchmark experienced a decline to as low as 3.66% on Thursday, but has since risen to 4% as of today.
The COMEX futures exchange saw gold reach its highest point in 33 months at US$ 2,085.4 on a day when Treasury yields rebounded from their previous lows. However, gold prices subsequently declined.
In recent times, there has been an apparent inverse relationship between the movement of real yields and the value of gold. The 10-year rate, which reached a low of 1.11% last week, saw a rise to 1.29% overnight.
In the realm of finance, the real yield is calculated by subtracting the market-based inflation rate, as determined by Treasury inflation-protected securities (TIPS) with a similar maturity, from the nominal yield.
The WTI crude oil market is currently displaying an inverse price trend, which is expected to persist until the release of the US CPI data on Wednesday. This data is expected to provide insight into the Fed’s future interest rate trajectory. According to a Bloomberg survey of economists, headline inflation for the period ending April is projected to be 5.0% year-on-year.
The decline in gold price led to a decrease in volatility. The GVZ index, which is analogous to the VIX index for the S&P 500, gauges gold volatility.
GC1 (GOLD FUTURES) WTI CRUDE OIL, US 10-YEAR REAL YIELD, GOLD VOLATILITY, USD
GC1 (GOLD FRONT FUTURES CONTRACT) TECHNICAL ANALYSIS
Since November of last year, there has been an upward trend channel for gold.
The peak of 2085.4 reached last week surpassed the March 2022 peak of 2078.8, yet it did not surpass the all-time high of 2089.2. This observation suggests that the region between 2080 and 2090 may serve as a zone of resistance.
If a break above that point occurs, it could potentially lead to a test of the ascending trend line. This trend line is currently intersecting at 2130. The likelihood of this occurrence is uncertain and requires further analysis.
In order for a bullish triple moving average (TMA) formation to occur, certain conditions must be met. Firstly, the price must be positioned above the short-term Simple Moving Average (SMA). Secondly, the medium-term SMA must be positioned above the short-term SMA. Lastly, the long-term SMA must be positioned above the medium-term SMA. Additionally, it is necessary for all SMAs to exhibit a positive gradient.
During this week’s price action, there has been a crossing of the 10-day and 21-day Simple Moving Averages (SMAs), as well as the 200-day and 260-day SMAs. Such crossings are referred to as Golden Crosses.
The current progression implies that a TMA meets its requirements when examining any grouping of daily SMAs. However, if the price concludes beneath any SMA, the TMA will be negated.
Potential assistance may be available at the preceding lows of 1980.9, 1945.0, and 1936.5 before reaching the current upward trend at 1915. In close proximity to said trend line lies the 100-day Simple Moving Average, which could potentially provide additional support in the vicinity.