Gold Weekly Price Forecast: A positive close for the week but last weeks high remains intact

Gold fundamental backdrop: The US are still struggling with the COVID-19 pandemic

In a week where vaccines have dominated the headlines, the worlds stock markets have push past some resistance levels to keep the risk-on theme ticking over. This comes while the US continues to struggle with the coronavirus pandemic and have had consecutive days of record case counts. It is an interesting cocktail of events for gold bugs. Because if risk assets rally gold would normally drop off but this time out that means the USD weakens which gives gold a chance to push higher with global bourses. There is a big caveat to this. If the stock markets fall sometimes there is also a liquidation in gold positions as margin needs to be covered elsewhere. This was noted in the drop in gold from 9th-16th March. If there is to be another nationwide lockdown in the US, gold may come out on top as it would be more localised selling pressure. Gold could then be the safe haven of choice once again. 

Central bankers around the world are still committed to their money printers. The ECB was a bit of a dud this week but Lagarde cannot be too hawkish on the state of the recovery as the EUR is flying already. In terms of the trade-weighted euro, I think the ECB could be slightly concerned about the current lofty levels. Having said that the EUR is the best of a bad bunch. The Fed and BoE also continue to commit to the current accommodative monetary policy stance but the Fed speakers confirmed the mandate is still inflation and employment. In the UK the realisation that the Furlough scheme is coming to an end is being noted and the employment figures could reflect that in the coming months. There is still bad news to come but the question remains if more stimulus would be added to weather the storm.

Gold weekly chart - Still in a clear uptrend

The gold weekly chart shows the price is holding above the previous consolidation high of USD 1802.92 per ounce from September 2011. There has been some hesitation this week as the price has not accelerated as some analyst's had suggested. Having said that, the chart is still very much a bullish one. The price could still reach and even break the all-time highs but there might need to be a retracement first. That is why all of the other support levels are marked in the chart. The next major level on the downside is the green line at USD 1677.15 per ounce. It has hard to see the price falling that far from the current level but stranger things have happened. But before that, the USD 1750 - 1700 per ounce area could be a strong support too. 

Gold 4-hour chart - Consolidation becomes clear

The 4-hour chart shows how gold is stalling at the current elevated level. The high at the orange line will need to break if the price is to gather anymore momentum for the trend continuation. This could be key leading into next week. The congestion between the USD 1700-50 per ounce area is much easier to see on this timeframe too. The mean value area in this consolidation stands close to USD 1730 per ounce and the level has been like a magnet when the price was around that point. This means it could be a good support in the future.

Next week - PMIs are back again

Next week we have some PMIs to look forward to at the end of the week but before there are some other events to watch too.

The PBoC are set to announce their latest rate decision and no change is expected. The report may be of some interest as their commitment to stimulus could be tweaked. The most recent rhetoric suggests this is not the case as an official said "policies and measures were made in response to the coronavirus outbreak, and once they completed their mission they have exited,” Guo Kai, deputy director of the monetary policy department of the People’s Bank of China, told reporters last Friday. He went on to say “In the next half of the year, the economy will return to normal, and the role of traditional monetary policy may become more obvious,”.

So the big event will be the PMIs keep an eye on if the numbers can get above the 50 (expansion) levels as the forecasters have predicted. Remember these numbers work on a rate of change bases so even if they do it does not mean the economy is out of the woods. 

Market consensus - Traders are still bullish

Its is clear to see from the latest results this week that traders are still bullish on the yellow metal. Personally I would have been more bullish on the longer-term horizon and more sideways over the coming weeks but let's see what happens. The longer-term forecast average is holding at USD 1817 per troy ounce and that is only a stone's throw away from the current price level.