Daily Market Recap - Gold under pressure as long rates rebound

Gold prices have shown signs of weakness on Wednesday as long-term rates rebound.

The ounce of gold has been declining since last week's high of $1800 and since the U.S. 10-year yield rebounded. From last week's low, the U.S. 10-year yield gained 10 basis points yesterday to 1.62% ahead of the FOMC's decision on Fed monetary policy.

The status quo is widely expected, but investors will be paying close attention to the language used in Jerome Powell's statement and speech, as it could provide clues to the timing of monetary tightening.

In addition to the Fed, investors will be closely watching the first estimate of the first-quarter GDP for the U.S. and the Eurozone released on Thursday and Friday respectively. The consensus is for 6.1% annualized growth in the U.S., up from 4.3% in the fourth quarter of last year. The New York Fed and Atlanta Fed models are expecting higher-than-expected growth of 6.8% and 8.2% respectively.

From a technical perspective, the outlook for gold prices is turning bearish again this morning as gold has broken through the neckline of its “head and shoulders” reversal pattern. This technical pattern provides a theoretical bearish outlook to at least $1,740, but the reversal could be more significant if long rates were to rise to their recent highs.

The 4-hour Bollinger Bands have also given a bearish signal as gold has just broken out from the bottom after a short squeeze period. This is theoretically a signal for a bearish impulse.

The bearish outlook would be invalidated if a bounce above $1790 occurs, which could be the case if the Fed is more dovish/pessimistic than expected.

Meanwhile, in the forex market, it's another session of near-stagnation of the major currency pairs, the 'pivot' Dollar now showing 72H of stability against the Euro (1.2080), the Swiss Franc, and the Pound.

(Chart Source: Tradingview 28.04.2021)

This apathy of the currencies is not completely incongruous in these sessions almost devoid of any statistics ... but it has lasted for 3 days, with a perfectly identical intraday volatility since Monday, which is more unusual (the last comparable episode dates back to mid-February).

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.