Is all that glitters gold?
Gold’s explosive momentum in May was akin to a speeding train reaching full velocity with fundamentals keeping the engines running at maximum capacity.
Since the start of Q2, the precious metal has gained over 11% - smashing through multiple walls of resistance levels with the destructive and uncontrollable force of a wrecking ball. With a broadly weaker Dollar, inflation fears, and falling bond yields sweetening appetite for Gold, the path of least resistance certainly points north. Fast forward today, Gold bulls remain in the driving seat and have already propelled prices to fresh multi-month highs beyond $1900.
The real question is whether bulls are confident enough to push prices to levels not seen since August 2020 at $2000. Fundamentally, Gold remains in a good place despite Federal Reserve officials recently reiterating that the recent pickup in inflation would be transitory. Given how concerns still linger over rising inflationary pressures, what better hedge against inflation than Gold? On top of this, just a take look at the Dollar. It remains depressed and unloved thanks to falling Treasury yields and dovish Federal Reserve officials. Given how the Dollar Index is struggling to push back above the psychological 90.00 level, this could signal further weakness down the line – a welcome development for Gold bulls.
But the real icing on the cake for Gold was the extreme levels of volatility in the cryptocurrency space which sent investors rushing back towards an asset that has withstood the test of time.
On the flip side, bulls could still face some obstacles down the road in the form of global growth optimism and risk-on sentiment, but this is a discussion for another day. In the meantime, fasten your seatbelts and be prepared for more action in the coming month.
Digging into the technicals, Gold is on route to securing its best monthly gain since July 2020. The commodity is firmly bullish on the daily timeframe as there have been consistently higher highs and higher lows. The MACD trades above zero while prices are trading above the 200, 100, and 50-day Simple Moving Average. A solid weekly close above the psychological $1900 level could encourage an incline towards $1927.5, $1960, and $2000, respectively. Should prices fail to keep above $1900, a technical pullback towards $1870, $1855, and $1840 could be on the cards. A solid move back below $1840 could threaten the current uptrend, re-opening a path back towards $1800.