Key Points:
- Reaching a turning point in the Elliot wave.
- EMA bias remains highly bullish.
- Rate hike fears could hinder further gains.
Sentiment should be returning to the gold markets this week as the metal looks as though it’s ready to begin tracking higher once more. Specifically, we seem to have reached another turning point in the long-term pattern that could signal that we are about to see another push towards the elusive 1300.00 handle.
First and foremost, we should probably define exactly which long-term pattern is likely shaping up for the metal. Looking at the price action during the recent upswing, there is a fairly convincing Elliot wave becoming apparent, even if we would ideally like to see that third leg be slightly longer prior to retracing. Regardless, as a result of the wave, we are now expecting to see the final leg take place which could mean some rather substantial gains are due to be realised.
Indeed, this imminent reversal seems to have quite a bit of support from a technical perspective as a number of measures are suggestive of a move to the upside. Firstly, we have the 100 day EMA acting as a source of dynamic support which is already doing an excellent job of halting further slides lower. In addition to this, the 12 and 20 day averages are in a bullish configuration despite the near-term downtrend.
Setting aside the moving averages, the movement of the Stochastics reading into oversold territory will be providing some solid buying pressure. Combined with the other factors mentioned above, this should see the bears begin to retreat which could give the bulls the opening needed to wrest control of gold back from their counterparts.
From a fundamental perspective, we have a handful of risk events on offer but the US employment data will likely be taking centre stage. More precisely, we have both the ADP and Official NFP numbers as well as the Unemployment Rate due out this week and these could generate some significant movement. As one would expect, any notable weakness in the results could set a fire under the metal once again and this would help the technical forecast to be realised in full.
Ultimately, we can’t escape the threat of a US rate hike that currently looms of much of the market. As a result, we could find any gains to be fairly hard won and prone to being eroded as the FOMC meeting draws nearer. Alternatively, this could provide a good litmus test for just how resilient the metal’s rally is. If gold continues to rise, we could infer that fears over the current US administration trump the influence of the Fed’s monetary policy.
