On the daily chart below, we can see the incredibly strong and fast rally in gold that started as the Silicon Valley Bank failed. The fears around the banking sector caused not only a flight to safety into gold, but also a fast repricing lower in interest rates expectations that brought down real yields and ultimately favoured the precious metal.
As the fears faded due to the emergency actions taken by the central banks, the buying momentum started to weaken and led to a correction. The rally was anyway overstretched as signalled by the distance between the price and the blue short term moving average and the divergence with the MACD.
On the 4 hour chart below, we can see that the break below the trendline gave the sellers some control. The moving averages crossed to the downside as the selling momentum intensified. It may be an early signal of a change in trend, but the next direction will be decided by the FOMC decision and the economic data in the next few weeks. It’s likely that we will see another selloff in case the Fed sounds hawkish, while a dovish outcome would give the buyers again control.
On the 1 hour chart below, we can see a clear setup for both buyers and sellers. The buyers will want to see the price to break above the trendline to start piling in and extend the rally towards new higher highs. The sellers, on the other hand, are likely to lean on the trendline where there is confluence with a 38.2% Fibonacci retracement level and the red long period moving average.
