Gold Prices Rebound on Dollar Weakness

Key Insights

• Gold prices rebound, hitting overhead resistance.
• The dollar index eased for a third straight trading session.
• Treasury yields eased as the market reduced hiking expectations.  

Gold prices continued to rebound after falling to 3.5-month lows last week. The dollar eased slightly after hitting a two-decade high. Benchmark yields pulled back as investors await economic data. The terminal rate that the markets are pricing into the interest rate swaps curve has declined over the past couple of weeks

Market participants have reduced their hawkish expectations of fed rate hikes. The swaps market was pricing in a terminal Fed funds rate of 3.75%. A week ago, that hawkish tone declined as Fed rate hikes are expected to rise to 3.0%.

Retail sales increased by 0.9% compared to expectations that they would rise by 1%. Retail Sales Ex-Autos increased by 0.6% compared to expectations that they would increase by 0.4%.

Technical Analysis

Gold prices fell rebounded and are now testing overhead resistance near the 200-day moving average at $1,836. Gold prices continue to face downward momentum as the 20-day moving average has recently surpassed the 50-day moving average and is fast approaching the 200-day moving average. Support is seen near the late January 2022 lows near 1780.

Short-term momentum turns positive as the Fast Stochastic generated a crossover buy signal. The fast stochastic has moved out of the oversold territory, reflecting accelerating positive momentum. The RSI bounced just above oversold territory, a reading of 30 on the relative strength index.

Medium-term momentum turned negative as the MACD generated a crossover sell signal. This occurs as the 12-day moving average minus the 26-day moving average crosses below the 9-day moving average of the MACD line.  The MACD histogram is printing in negative territory with a declining trajectory which points to lower prices.