Gold had been experiencing a bearish phase in the month of May, as it fell till USD 1800/oz last week. Even though the broad stock market indices have corrected around 20% for the year, gold more or less had been consistent thereby proving itself to be an outperforming asset.
Last week gold reversed its 4-week bearish week as recession worries increased and Federal Reserve keeps its options open to further increase the Fed rates by another 2% by end of 2022, as it tries to fight the increasing inflationary pressures thereby providing some support to the bullion metal-which is considered a hedge against inflation.
Technically gold was able to breach and sustain above a bearish trend line. The bullishness is also supported by the volume-trend indicator (TWV’s proprietary indicator), which is above the bullish zone and is placed above the indicator’s bearish trend line. Even though the bulls are steadily returning in the metal, the bull run may be expected once the supply zone of 1858-50 is breached and sustained. In the meantime, the metal may remain range-bound between 1850-1820 levels.
Traders may keep an eye on the following economic release over the week for increased volatility in the metal.
Durable goods Order-April (25th May)
FOMC Minutes (25th May)
US GDP(Q1)- Prelim (25th May)