Gold Monthly Forecast – April 2019

The price action for Gold in both spot and futures markets during the month of March was highly positive. However, profit booking activity towards the end of Month led to yellow metal losing all its gains and closing on a neutral note albeit all for weeks seeing a steady increase in price action. Safe-haven assets saw a high level of attention and fund flow across the month owing to cautious investor stance stemming from updates pertaining to geopolitical events and concerns of global economic slowdown. A look at the weekly chart shows that price trend from the first two months of 2019 has repeated itself in the course of a single month during March 2019.

The price action of Gold was rangebound for most of the first week of March as optimism surrounding the Sino-U.S. trade deal and strong US Dollar in global market capped upside move. But, European Central Bank’s dovish forward guidance with clear mention of plans to initiate their targetted long term refinancing operation aka quantitative easing from September 2019 despite just terminating the previous QE program last December caused demand for gold to spike in the global market. Weak US Dollar in the broad market, Brexit woes influenced by the UK parliament’s rejection of PM May’s deal and EU Junckers offer for legally binding assurance to work on an alternative for Irish backstop agreement by December 2020 and comments from U.S. representatives on uncertainties surrounding Sino-U.S. trade deal further boosted demand for safe-haven assets helping Gold retain positive action during the first half of the month.

Gold Closed Flat As Profit Booking Drained Gains

Caution ahead of US FOMC update and dovish forward guidance from FOMC members resulting in weaker US Greenback in the global market helped the yellow metal scale $1300 handle. US FOMC press conference saw Fed Chair Powell and FOMC members state plans for rate cuts in the year ahead depending on economic conditions and no plans for rate hike in the year ahead. Powell stated that cues from macro data owing to the impact of geopolitical issues are seeing mixed cues causing Feds to adopt a patient stance and any signs of recession could lead to rate cuts in the year ahead. US Fed’s joined bear cartel of central banks as key figures from major central banks from Australia, China, Canada & Europe also hinting at a slowdown in global economy.

Further, disappointing Euro area macro data updates and declining European government bond yields caused investors across the globe to take on cautious stance supporting precious metal bulls. The last week saw government bond yields from all major global economies decline sharply boosting concerns of global economic slowdown and recession in the U.S.A. However, bond yields recovered from decline as the month came to close easing risk-averse investor sentiment. This led to intense profit booking activity across the globe resulting in yellow metal seeing the price per ounce fall below $1300 handle in both spot and futures markets. A recovery in U.S. T-Yields boosted US Greenback in the global market adding momentum to precious metal bears resulting in Gold seeing sharp declines.

Trade War & Brexit Woes Underpin Gold Bulls

However, the demand for precious metals still remains high in the global market and price action could see upward movement in the month of April as both Brexit and Sino-U.S. trade talks are yet to see a positive resolution. Further, U.S. T-Yields are yet to fully recover from recent decline to multi-month lows. Bank of Japan’s MPC members also hinted at global economic slowdown during the last week of March. If the current geopolitical scenario continues as it is now or worsens in the month ahead global economy will see further declines. Macro data updates or headlines which hints at such a slowdown will help Gold recover momentum across the globe. While escalating tensions surrounding geopolitical issues are also likely to influence risk-averse investor sentiment. Even when looking from a technical perspective, bears are unlikely to gain a strong foothold or even a slight grip on price momentum as long as the price holds steady above $1270 handle. Global political and economic climate has resulted in some level of steady fund flow into precious metals market while fundamentals also provide strong support to precious metal bulls. Unless two key geopolitical issues namely Brexit and trade war between China & U.S.A, are permanently resolved the price action in gold will always have a bias favoring upside price action from a fundamental perspective.

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This article was originally posted on FX Empire

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