Gold is seeing a minor setback but remains above the 55-Day Moving Average (DMA) at $1,844, which should act as the bottom of a short-term range for now, according to strategists at Credit Suisse
Crucial support aligns at $1,776
“Gold has stalled in the short-term, in line with our view from last week that the market could see a lengthier pause below this level. However, the market has managed to remain above the 55-DMA, currently seen at $1,844, which should act as the bottom of a short-term range for now.”
“From a more medium-term perspective, only above the $2,070/72 record highs of 2020 and 2022 would suggest we are seeing a significant and meaningful long-term break higher, with resistance levels then seen at $2,300, then $2,500. This is not our base case for now though.”
“Support is seen at $1,844 initially, where the 55-DMA is hovering, before the crucial 200-DMA, currently seen at $1,776.”
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Gold prices managed to hold above the 55-DMA (daily moving average) at $1,844 per troy ounce, bolstered by a surge in inflationary expectations and the continued rise in the US 10-year treasury yields. Analysts at Credit Suisse expect the rally in gold prices to sustain in the coming weeks, with the $1,850 level proving significant.
The US dollar, which had been fairly steady against its major peers in the previous sessions, slips ahead of the US FOMC meeting minutes, providing some assistance to the yellow metal. Additionally, improved risk appetite also triggered by the positive economic data from the US also supported commodity, and by extension, gold’s rise as well.
The bank’s forecast is underpinned by the inflationary expectations, which have been rising amidst expectations of the tremendous pandemic-driven fiscal stimulus and the massive printing of money. The bank noted that this could provide short-term upside opportunity to gold and in the medium-to-longer term, they expect gold prices to be rangebound in the $1,800-$1,900/oz. range.
The Reserve Bank of Australia also released its policy decision overnight, and the central bank indicated that its bond purchases will be increased by AUD$100 billion in June, further providing a boost to gold prices. On the technical front, gold managed to trade above the 55-DMA at $1,844/oz. and investors will be closely watching the $1,850/oz for the next level of resistance.
Overall, Credit Suisse forecasts that gold prices will likely remain well supported in the coming weeks and could reach new highs as inflationary expectations keep rising. With the US FOMC meeting minutes to be released later today and the long weekend looming in the US, any significant movement in gold prices could be witnessed in the near-term.
