Daily Market Recap - Gold price tries to rebound after Joe Biden's infrastructure plan

The price of gold has rebounded in recent days to return near its March highs. The precious metal is benefiting in the short term from the consolidation of long rates, but also from the US infrastructure investment plan.

Joe Biden presented the first part of the plan last week which is smaller than expected, $2.3 trillion against expectations of between $3 trillion and $4 trillion, but which should be accompanied by a second part this summer.

This bill is positive for gold in the current environment where the market fears a slippage in inflation and debt that is already at levels not seen since World War II.

That said, the outlook for gold is still bearish. Although rates have been consolidating in recent days, their trend remains bullish. As long as real long rates in the U.S. are bullish, the bond market will look increasingly attractive, which will put pressure on gold.

In terms of technical analysis, the underlying trend has been unquestionably bearish since last fall. Nonetheless, since reaching its May 2020 lows at around $1660, gold has been consolidating between this support and its former November 2020 low at $1764, which was breached in late February.

Below $1764, the bearish outlook continues to dominate. A return near this resistance could actually be an attractive price level to reposition in the direction of the underlying trend.

The outlook would only become bullish again if the price of gold breaks through this resistance. The price of gold would then form a bearish “double bottom” reversal pattern, which would pave the way for gold to return to the top of its long-term bearish channel.

(Chart Source: Tradingview 06.04.2021)

In practical terms, market participants' outlook on the global economy will dictate gold's trend. The more optimistic investors are about the economy, the more long-rates will rise, which will put pressure on gold (and vice versa).

Disclaimer: This material has been created for information purposes only. All views expressed in this document are my own and do not necessarily represent the opinions of any entity.