Gold’s Bullish Uptrend Won’t Be Reversed by a ‘Mean Washout’—Analysts
The comments below are an edited and abridged synopsis of an article by Anna Golubova
Better-than-expected US data and hawkish comments from St. Louis Fed President James Bullard weighed on gold last week, but analysts don’t see gold’s bullish uptrend reversing soon. After seeing its best gains in three years, gold is testing the $2,000-an-ounce level.
In the short term, analysts do not rule out a reversal in gold after its quick gains. But the overall trend will remain intact, taking prices above $2,000 an ounce.
“The immediate stretch might be at risk of exhaustion here. But the trade is constructive as long as gold stays above $1,850. Even if we get a mean washout, the downtrend is broken, and I am looking for an uptrend resumption,” Forex.com’s senior technical strategist Michael Boutros said.
The levels to watch are $2,034, the record-high weekly close, and then $2,075. That would open the door to $2,150, Boutros said.
The banking crisis combined with rate hike expectations easing is creating “true risk-off haven flows,” he added.
The biggest variable for gold is contagion risk in the banking sector. Will Washington backstop all depositors? On that front, US Treasury Secretary Janet Yellen and Fed Chair Jay Powell have been sending mixed signals.
The banking crisis is doing the work for the Fed, and there could be a credit crunch coming, RJO Futures senior market strategist Frank Cholly said. “It will get harder for people to borrow money… We will see things slow down without the Fed having to raise rates further. Banks will be tighter and fussier about lending money.”