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Gold futures traded in a tight range on Thursday in what was a relatively quiet session across most financial assets. Traders had one eye on Friday’s non-farm payroll numbers and stock markets retreated across the board. The S&P 500 pared early losses to finish lower by -0.12% on the day.
ECB Chief Mario Draghi said that ECB policy makers would reassess their decision for euro stimulus next quarter and this saw many EURUSD traders scale back their bets for continued ECB dovish monetary policy. The currency has been one of the weakest performers this year. Traders may be now wondering whether ECB policy moves are ever going to happen. As a result, many traders have sold the US dollar this week and this has seen some gains for precious metals.
On Thursday, gold traded around the pivot for most of the day, about $6 above the key $1200 level. The metal is on course for its biggest weekly advance since February as crude oil futures have plummeted and traders have sought the refuge of safer assets.
As crude oil trades under $67 a barrel, the lowest level in 5 years, gold has provided a short term replacement for commodity bulls. However, gold is still not far away from five year price lows so any bull trend is yet to be confirmed.
Technicals & Outlook
As mentioned, gold traded in a tight range on Thursday around the key $1200 level. Looking at both the daily and weekly price charts, gold is still in a downward trend and previous attempts at forming a bottom have been largely unsuccessful.
However, given the price chart, technical indicators, and reversal potential from the US dollar, we remain cautiously bullish at this time.
Elliott wave is wave (iii) up inside wave A, this wave is in five waves [i,ii,iii,iv,v] and over the next few days we see gold pushing higher with a potential move to $1250. We are also bullish over the next few weeks and see potential for a longer term move to $1350.
Thierry Laduguie is Trading Strategist at www.bettertrader.co.uk
