Gold Prices at Risk of Freefall Below the 100-Day MA

GOLD (XAU/USD) PRICE FORECAST:

READ MORE: Bank of Canada Comes Out Swinging with 25bps Hike, USD/CAD Slides

Gold prices fell around $30 from its high during yesterday’s US session as a surprise hike by the Bank of Canada (BoC) had a ripple effect across the markets. The Bank of Canada followed in the footsteps of the RBA with a surprise 25bps hike with swaps now completely pricing in the probability of a 25bps rate hike from the US Federal Reserve (Fed) in July. However, the probability for a rate hike at next weeks Fed meeting rose as well but remains below the 40% mark.

Source: CME FedWatch Tool

The impact of yesterday’s decision also impacted US Treasury Yields which saw a sharp upward move as the possibility of higher rates for longer grows. The greater the likelihood of further increases from the Fed the more support we are likely to see for US yields which in turn could continue to cap any attempt by Gold prices to push higher.

CLIENT SENTIMENT DATA AND DAY AHEAD

Taking a look at the IG client sentiment data and we can see that retail traders are currently net LONG on GOLD with 73% of traders holding long positions (as of this writing). Not surprising at all given that Gold has been unable to follow through on recent moves with market participant likely expecting support at $1940 hold firm. At DailyFX we typically take a contrarian view to crowd sentiment meaning we could see Gold prices continue to decline.

Looking ahead to the rest of the day and the calendar remains relatively quiet with jobless claims data out of the US the only highlight. For now, it appears Gold prices may continue looking for guidance from US Treasury yields and the DXY ahead of next weeks CPI release and Federal Reserve meeting.

For all market-moving economic releases and events, see the DailyFX Calendar

GOLD TECHNICAL OUTLOOK AND FINAL THOUGHTS

Form a technical perspective, Gold price action has been messy of late. Prior to yesterday’s drop, price action hinted at a new high looking toward the $1990 handle and the 50-day MA. The pair has once again found support at the 100-day MA overnight and continuing to push higher into the European session, trading just shy of the $1950 handle.

Gold (XAU/USD) Daily Chart – June 8, 2023

Source: TradingView, Chart Prepared by Zain Vawda

Dropping down to a smaller timeframe and looking at the H1 chart we are printing higher highs and higher lows since bottoming out around the $1940 handle. A push higher and deeper retracement could be in store if the recent H1 higher low around $1944.73 holds firm. A 1-hour candle close below obviously invalidating the bullish structure and could see a retest of yesterday’s lows and a potential push toward the $1925 support handle.

Gold (XAU/USD) Daily Chart – June 8, 2023

Source: TradingView, Chart Prepared by Zain Vawda

The 100-day MA on the daily timeframe resting around $1940 will be from a bigger picture perspective, with a daily candle close below opening up the possibility of a freefall in gold prices. We do not have a lot in the way of support between the 100-day MA and the $1900 psychological level. It is important to note that given next week’s US CPI release and Federal Reserve meeting there is a real chance we could continue to see rangebound price action between the 100-day MA ($1940) and 50-day MA ($1990).

Key Intraday Levels to Keep an Eye On

Support Levels:

Resistance Levels:

Written by: Zain Vawda, Markets Writer for DailyFX.com

Contact and follow Zain on Twitter: @zvawda