Gold Price Forecast: Waning Bullish Conviction, but Geopolitical Tensions Could Prove Supportive

Gold price forecast

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The spot price of gold is trading at $1735 ahead of the weekend, up slightly on rising geopolitical tensions concerning, China, the U.S. and Hong Kong. However, analyst and technical forecast Richard Perry at Hantec Markets says he is cautious on the metal's ability to push higher.

Our bullish conviction on gold has taken a hit. Yesterday’s decisive negative candle saw the price drop around -$25 (almost -1.5%).

An intraday breach of the $1722 pivot support comes as a warning too.

The market continues to hold within the support of the recent mini uptrend channel (which is at $1714 today), but we are cautious now.

The market held on to the pivot support at $1722 on a closing basis, but there are warnings signs beginning to show for the strength of the recovery.

Gold price chart

The MACD and Stochastics momentum indicators have lost their positive configuration and are now tracking lower.

The market has ticked back higher early today and this move needs to be built on with a convincing close higher today. The hourly chart needs to show a strong response too for the bulls to get back on track.

The move on hourly RSI below 30 is another warning signal, and the rebound needs to move decisively above 60 today, whilst hourly MACD lines need to recover above neutral.

Initial resistance is at $1741 under the Wednesday lower reaction high of $1753. Intraday support at $1716 is now increasingly important.

Gold Prices Supported by Rising Geopolitical Tensions

At a time where markets are trying to build the momentum to take the next step forward in this recovery, growing geopolitical risk between the US and China is not ideal.

We are increasingly seeing the threat of renewing tensions between the world’s two most powerful economies.

Moves in the US Congress to sanction China over potential Hong Kong legislation adds to tensions that are already fraying after President Trump has been firing off over the COVID-19 blame game and interference into his re-election campaign.

Risk aversion is taking hold once more through markets (certainly not helped either by China reluctant to issue a 2020 GDP target). US Treasury yields are again heading lower, and the dollar gaining ground.

Closing lower yesterday, equities are again weaker today.

This renewed swing lower has come just as several key markets had been testing resistance of a risk recovery.

Wall Street indices are pulling back, EUR/USD is backing away from $1.1000 again, whilst Brent Crude oil is falling under its April highs.

How the bulls respond in these markets in the coming days could determine whether the multi-week ranges are set to continue to leave the risk recovery on ice.

In other news overnight, the Bank of Japan held an unscheduled meeting and kept policy unchanged with -0.1% rates and a 10 year yield target of zero.

Also, UK data has not been overly encouraging, where UK Retail Sales in April fell more than expected at -15.2% (ex-fuel) and public borrowing was way higher than expected at £61.4bn.