Weekly Chart Analsysis
Last week's movement by gold has changed its technical position. The candlesticks have moved above the 30-week EMA and the EMA has bullishly turned up. Moreover, the weekly RSI has popped above 50 (green rectangle) which is the bullish side of the indicator. The longer it maintains above 50, the greater the momentum support for the yellow metal. Another positive is that gold's candlesticks have broken out above the green down sloping trendline, denoting the improved upside momentum.
Drivers of Gold
The gold price has typically been inversely correlated to the US real rate. However, this may have changed, for now, due to safe haven flows. The gold price is reacting to the Israel-Hamas conflict and the fear that it might spread across the region. Currently, this seems to be the primary driver of capital into XAUUSD. Nevertheless, the relationship between the real rate and gold has not conclusively been broken and needs to be monitored.
If the conflict remains contained the key driver is likely to revert to the direction of the real yield, and its underlying economics.
Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.