GOLD TECHNICAL FORECAST: MIXED
XAU/USD FUNDAMENTAL BACKDROP
Spot gold[1] has been on the climbing this week after markets continue with the view that a hawkish Fed[2] is priced in leaving the U.S. dollar[3] disappointing from earlier expectations. Investors have been looking elsewhere for opportunities which have kept the dollar muted despite U.S. 10-year Treasury yields hitting levels last seen in early 2020. The outlook remains bullish for the greenback but the post-FOMC[4] conference next week should shed more light on the balance sheet run-off approach.
U.S. 10-YEAR TREASURY YIELD
Source: Refinitiv
Short-term, Russia-Ukraine pressures could have a significant impact on the commodity market should sanctions be imposed on Russia driving higher natural gas[5] and wheat prices in particular. Global inflation[6] is already running hot with China’s zero tolerance approach to COVID-19 and rising oil[7] prices adding fuel to the fire. An extra layer of infliction from Russia/Ukraine, would give gold a positive outlook via its tenuous “inflation-hedge” designation.
A more longer-term view (yearly forecast) favors a decline in gold prices with higher interest rates, rising real yields, fading inflation and a stronger U.S. dollar[8].
TECHNICAL ANALYSIS
GOLD PRICE DAILY CHART
Chart prepared by Warren Venketas[9], IG
The medium-term symmetrical triangle constricting gold price action[10] since mid-2021 is converging pointing to an impending breakout. The eventual break above 1830.00 earlier this week saw prices reach almost 1850.00 before settling around 1840.00.
A rising channel structure (blue) is also evident since late 2021 which resembles a bear flag pattern. A bear flag[11] is traditionally indicative of a bearish continuation should prices break below flag support. With fundamentals
