Gold starts May with a bearish note

Gold starts May with a bearish note

market outlook

Gold futures at COMEX is down 1.92% at $1875 per troy ounce on mid-Monday trades.

Gold opened May on heavy bearish pressure. Price has gone below the $1,900 price level as price declines due to the strengthening U.S. dollar, and Fed’s tightening monetary policy among other factors. It is moving towards the support level at $1860, while Treasury yields are trying to settle above yearly highs. Currently, the yield of 30-year treasuries is trying to settle above the psychologically significant 3.00% level. Also, the recent sell-offs in the equity markets didn’t provide any support to the non-yielding gold.

A lower-than-expected reading on China’s April PMI data has exacerbated fears about a lockdown-induced economic slowdown as well as the possibility of the EU’s sanction on Russian energy imports has been acting as a headwind for gold. Focus is now upon the anticipated 50 bps rate hike from the Fed on Wednesday. Higher interest rates as a result of central bank policy tightening tend to weigh on non-yielding assets such as gold.

On the technical side, the RSI of COMEX gold futures stood at 36.54 and is currently trading below all SMAs: MA (5), MA (20), and MA (50). SO, SELL position can be taken with the following target and stop-loss:

TRADE SIGNAL: COMEX GOLD FUTURES – SELL: 1860, TARGET: 1800, AND STOP-LOSS: 1900

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