Gold News: Price Prediction Points to 50-Day MA Test as Bulls Probe for Value

Selling Pressure Builds as Traders Eye 50-Day Moving Average

Spot Gold is consolidating on Wednesday after clearly rejecting a key 50% level at $5002.31 the previous session. Yesterday, the market hit a two-week low at $4842.60 before bouncing back a little today. That low wasn’t a significant level on my charts, so my original premise remains intact. At the very least, I see selling pressure extending into a support cluster at $4760.87 to $4744.34, but my best target is the 50-day moving average at $4672.09.

Long-Term Bulls Want to Buy, But Only at Their Price

I think long-term bullish investors are going to try to scoop up as much gold as they can during this consolidation phase, following last month’s major run-up, but they are going to buy on their terms, at their price. To me, recent price action does not suggest traders are interested in taking out offers, so bidding is going to be their preference.

Once this consolidation phase is completed and buyers have accumulated enough gold, then momentum should shift to the upside, aided by the taking of offers. Be patient because this process could take months.

June Fed Meeting Could Be the Catalyst That Ends the Consolidation

Now we could see a spike to the upside if geopolitics rattle traders enough to forego value and disregard price, but if we return to the traditional relationship between interest rates, the dollar and gold, then we could see consolidation until June. Why June? That month’s meeting is expected to be chaired by President Trump’s new appointee, Kevin Warsh. Furthermore, the Fed is going to have a few more months of labor market and inflation data to make their call on a rate cut.

FedWatch Tool Shows 50/50 Odds for June Rate Cut—That’s the Real Story

Currently, the CME FedWatch Tool shows a 92.1% chance the Fed will leave rates unchanged at its March meeting. A 25-basis point cut in June is only 50.2%. I think this 50/50 chance of a rate cut in June is what’s driving the consolidation in gold, so pay attention to this indicator. If it starts to move higher then it could start to take gold with it. If it falls sharply then I expect gold to continue to drift lower.

The Dollar’s Next Move Could Dictate Gold’s Direction

The U.S. Dollar Index (DXY) consolidation is also having an impact on gold. DXY bottomed at 95.551, the day the Fed released its latest monetary policy statement and the day before gold hit its record high at $5602.23. Like gold, DXY is consolidating under its 50-day and 200-day moving averages. If buyers happen to trigger a breakout over the 200-day MA at 98.455, then Spot gold could plunge into the 50-day MA at $4672.09 or even revisit the February 2 low at $4402.38.

The Bottom Line: Patience Required as Accumulation Phase Could Last Months

In conclusion, spot gold is drifting toward value after failing to breakout to the upside recently, suggesting traders aren’t taking out offers and may be trying to accumulate by buying at their price. The 50-day moving average is a good starting point to look for value. Consolidation could last months if there is no clarity from the Fed, but watch the FedWatch Tool for movement away from a 50/50 rate cut in June. This could be the catalyst that moves the gold market out of the consolidation phase.

More Information in our Economic Calendar.