Gold Price Analysis: A mixed day in macro markets keeps gold in delicate balance

Fundamental backdrop

There has been lots of news today and a top German court kicked things off by suggesting the ECB did nothing illegal with its public sector purchasing programme (PSPP). Having said that it seems that the court is giving the ECB 3 months to fix and justify some inadequacies or lose the Bundesbank as a participant. The ECB’s new pandemic-fighting purchase scheme which was approved last month to help the coronavirus-stricken euro area economy will not be affected by this ruling, as the Constitutional Court stated that this decision does not apply to that programme and only to the PSPP.

Later in the session, there was also some data from the US where US Markit Services PMI for April printed at 26.7 (est 27.0). This was the final reading so nobody was expecting any fireworks but the number dipped slightly under expectations.  ISM Non-Manufacturing PMI, however, beat the estimates of 36.8 and hit 41.8 for April.

There were also some comments from Fed member Evans who stated April unemployment is seen rising to double digits and future steps could include ‘elements’ of yield curve control. The Fed are sounding more and more like the Bank of Japan as each day passes. Interestingly a NY Fed Report suggested US household debt levels rose to a record of USD 14.3 Tln In Q1. Not really market moving but shows the importance of holding gold in your portfolio nevertheless. 

All of the major US and EU indices are trading higher on Tuesday and the US dollar is 0.26% higher. This makes the stubbornness of gold all the more interesting and when stocks and the greenback retrace maybe we could see some upside.

Technical picture

Looking at the hourly chart below USD 1700 still seems to be the pivot level at the moment. The price is making lower high and lower low waves and at the moment the price is in an important zone. If USD 1690.00 breaks to the downside it would seem that the down move is likely to continue. On the upside, the bulls will need to break the red rectangle at the 61.8% Fibonacci retracement and the black downward sloping trendline to have any chance to move back to the highs. This is clearly a consolidation phase and it seems the market is waiting for the next catalyst to help inspire some movement.

Additional levels