Gold price hover near 4.5-month high on weaker U.S. dollar (With Trading Strategy)

Gold prices climbed on Monday to hover near a 4.5-month high, supported by a weaker U.S. dollar and growing inflationary pressure, while a slide in cryptocurrencies further lifted the safe-haven metal’s appeal.

The spot gold rose 0.17% to $1882.56 per ounce by 15:50(GMT+8).

Last week, gold prices hit their highest level since Jan. 8 at $1,889.75.

“The U.S. dollar index remains relatively weak and the manufacturing and service PMI’s from the United States and Europe raised the prospect of inflation in months to come,” Margaret Yang, a strategist at DailyFX said.

“Recent slide in cryptocurrencies also boosted the appeal of gold as an alternative investment asset. Gold’s upward momentum is very strong and it is likely to challenge a key psychological level at $1,900 in the days to come.”

The dollar stood near its lowest levels in three months against the resurgent euro and other European currencies, making gold cheaper for other currency holders.

Rising U.S. inflationary risks have spooked markets after data showed rise in consumer prices and pick up in factory activity, lifting gold’s appeal as an inflation hedge.

Indicative of sentiment, holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 0.6% to 1042.92 tonnes on Friday. Speculators raised their net long positions in COMEX gold in the week ended May 18.

Further contributing to gold’s move, bitcoin fell 13% on Sunday, sending it down about 50% from the year’s high after Beijing stepped up its efforts to crack down on bitcoin mining and trading.

The gold market continues to see strong bullish momentum, and this time it's from investors fleeing the high volatility in cryptocurrencies, according to the latest results from the Kitco News Weekly Gold Survey.

In the previous survey, analysts were looking for gold to regain its 200-day moving average at $1,850 an ounce. This week, both retail investors and Wall Street analysts remain bullish on the precious metal as the price continues to climb to its next target at $1,900 an ounce.

"The tide has turned, and people are moving back into gold, aided by recent cryptos pyrotechnics and the never-ending spending plans from Washington," said Adrian Day, president of Adrian Day Asset Management, who said he was bullish on gold for next week.

This week, 15 analysts participated in Kitco News' gold survey. Of those, 11 analysts, or 73%, said they were bullish on gold; at the same time, three analysts, or 20%, said they were bearish on prices next week. One analyst, or 7%, said they see gold prices trading sideways.

Meanwhile, a total of 1037 votes were cast in online Main Street surveys. Of these, 716 respondents, or 69%, looked for gold to rise next week. Another 154 respondents, or 15%, said lower, while 167 voters, or 16%, were neutral.

Photo: KITCO

The bullish sentiment comes as the gold market ends the week with nearly a 2% gain as prices managed to hold critical support above $1,850 an ounce.

Adam Button, chief currency strategist at Forexlive.com, noted gold's strong momentum in the face of renewed strength in bond yields.

"The market reactions to the US CPI report and taper talk in the Fed Minutes was telling. There were some major hiccups, but they did nothing to derail the trend of dollar weakness and gold strength," he said. "That's a great sign of underlying demand for gold."

Colin Cieszynski, chief market strategist at SIA Wealth Management, said that he expects gold to continue to benefit from investors move away from cryptocurrencies. He added that the technical picture does not show that the precious metal is overbought.

Marc Chandler, managing director at Bannockburn Global Forex, said that he also doesn't see an overly stretched market even if momentum indicators are starting to firm.

"Weekly momentum indicators are head up and suggest any near-term pullback is a buying opportunity," he said.

Chandler added that the next major level to watch is $1,900 an ounce.

However, not everyone is convinced that gold prices can move higher, and the market could be due for some consolidation after the early-week breakout.

Darin Newsom, president of Darin Newsom Analysis, said that unless the gold market can make a new one-week high next week, it could be headed back down to retest support at $1,850 an ounce.

"The contract looks to be in a position to establish a short-term downtrend, with the trigger being a move below its previous 4-day low," he said.

Trading Strategy (source: Trading Central)

Pivot: 1878.00

Our preference: long positions above 1878.00 with targets at 1893.00 & 1901.00 in extension.

Alternative scenario: below 1878.00 look for further downside with 1872.00 & 1866.00 as targets.

Comment: the RSI calls for a new upleg.

Supports and resistances:

1910.00

1901.00

1893.00

1885.50 Last

1878.00

1872.00

1866.00

Guideline for Trading Central strategy 

Trend chart reading guideline

1. First look at the time period in the upper left corner of the chart: ·30MIN and 1H chart shows the trading suggestions for intraday ·Daily chart shows the market trend analysis in next 2-3 days

2. The blue horizontal line on the chart marks the pivot: pivot indicates the reversal of the market. When the price is above the pivot, it indicates an upward trend, when the price is below the pivot , it indicates a downward trend. When the price breaks through the pivot, the trend is reversed.

3. The red and blue thin curves in the Candlestick chart chart are technical indicators: Red line is MA20+Bollinger bands, Blue line is MA50. under the Candlestick chart chart are also the technical indicators: Blue line is RSI, Red line is 9MA;

4. The green horizontal line is the resistance level for a price increase, and is also the profit target for long orders; the red horizontal line is the support level for a price decrease, and is also the profit target for short orders.

How to use TC strategy？

1.[Pivot] is the reversal line of the market trend. When the price up the pivot line which means in Bullish, you can open a long position or Buy. on the contrary, when the price under pivot line which means in bearish. You ‘d better make short positions or Sell. 

2. [our preference] is the main trading suggestion for your reference. You can exit your trading refer to this target or close positions before it.

3. [Alternative scenario] is the plan B for your reference. 

4. [Comment] is the technical analysis of market trends and technical support for trading strategies. 

5. [Supports and resistance] Supports are levels where the price tend to find support as it falls.

Resistances are levels where the price tend to find resistance as it rises. So, exit before the trend reverse.