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David Becker

Gold prices attempted to break out further but were rejected after hitting fresh 7.5-year highs during the Asian and European trading hours. As US stocks started to jump higher following news that Moderna, a large pharma company announced positive, news on its vaccine testing. Gold hit a high of $1,765 and then moved lower as the US session opened, eventually declining into negative territory. The dollar moved lower despite rising US yields. The increase in both the US 10-year and 2-year yields generated headwinds for the yellow metal. Hedge funds add to both long and short positions in futures and options. The net open interest remains long 181,585 to  20,612, despite managed money adding 1K contracts to long positions and 12K contracts to short positions in futures and options.

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Technical analysis

Gold prices attempted to move higher but were rejected. The rise in US yields put pressure on prices that whipsawed and eventually closed lower. The weekly chart of gold is still forming a bull flag pattern which is a pause that refreshes higher. Resistance is seen near Monday’s higher at $1,765. Support is seen near the 20-day moving average at $1,711.

Medium-term momentum has turned positive as the MACD (moving average convergence divergence) index generated a crossover buy signal. This occurs a the MACD line (the 12-day moving average minus the 26-day moving average) crosses above the MACD signal line (the 9-day moving average of the MACD line). The MACD histogram also generated a crossover buy signal rising through the zero index level. The trajectory is upward sloping but at a flattish pace, which reflects further consolidation. Short term momentum is also stalling as the fast stochastic moved sideways in overbought territory. The current reading on the fast stochastic is 82, above the overbought trigger level of 80 which could foreshadow a correction.

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