Gold is stitching together a decent recovery over the last two days, with prices now closing back in on the $4,400 mark.
I would say part of that is coming from a calmer backdrop in broader markets. Oil prices have eased and 10-year Treasury yields have slipped back below 5%, taking some of the pressure off gold after the volatility surrounding the Fed earlier this week.
And in the other part, I think the charts also tell a bit more as to what’s happening with gold since the Fed decision.
Earlier this week, gold was poised to break the neckline support around the $4,290 to $4,310 region and definitely threatened a firmer move immediately right after the Fed.
But buyers managed to step in, facilitating a rebound after gold briefly tested the area around $4,240, which lines up almost perfectly with the 61.8 Fib retracement level at $4,241 of the swing higher from July to August.
That held, and buyers have since pushed price back above the $4,328 level – the 50.0 Fib retracement level – and also now back above the 100-day moving average (red line) of $4,321. From a technical perspective, that shifts the bias on the daily chart to being more neutral again – further invalidating the downside break from earlier this week.
And from there, the recovery has gathered some pace today.
The hourly chart is also looking better with gold buyers now reclaiming territory above the key near-term moving averages. And that is now seeing another run at the $4,400 region for the first time in a week.
The $4,400 to $4,415 region will be the first test on any further upside moves here, as buyers look to build on the more bullish near-term bias above now. But above that, the 200-day moving average at around $4,541 will present a much sterner technical test.
But for now though, I wouldn’t get too far ahead of things.
Gold is still working through a fairly choppy consolidation after falling from nearly $4,700 in August. The technical picture has definitely improved in the last two days, but there is still much work to be done on the part of buyers to convince of a stronger rebound.
To the downside, I would eye the first key risk level to be the 100-day moving average and the 50.0 Fib retracement level in the region of $4,328-31 currently. Following that, a break below $4,241 will be what is needed to drive further pressure and steer the conversation towards a potential drop to $4,000 next. But again, let’s take things one step at a time for now.
Oil prices have come off the boil but are still lingering just above $100 and 10-year Treasury yields may not be racing higher but are settling just under the 5% level. It’s not time to be overly optimistic about the overall macro backdrop yet, just because markets have remained slightly calmer after the Fed decision this week.
This article was written by Justin Low at investinglive.com.