Gold had some large swings last week but ultimately ended up higher at around the 1298.52 mark. Notably, Thursday saw the metal climb as high as 1315.45 before subsequently collapsing and closing the session down at 1278.40. The plummet came on the heels of a surprise uptick in the Philadelphia Federal Manufacturing Index which saw the USD recover strongly in the wake of the FOMC meeting. Going ahead, Brexit fears will be driving gold prices as traders look to insulate themselves.
Despite a large set back mid-week, gold continued to rally and closed up around the 1298.52 mark. The FOMC meeting provided a large degree of buying pressure for the metal as many traders rightly began to doubt the probability of a rate hike as the announcement drew nearer. However, in the wake of the rate decision, an excellent US Philadelphia Federal Manufacturing Index result of 4.7 took the market by surprise. Subsequently, a knee-jerk reaction occurred and sent the metal plummeting before more level headed trading took over in the Friday session which saw the metal close the week significantly higher.
Looking to the technical analysis, gold looks poised to remain bullish but the incredibly robust zone of resistance around the 1300.00 handle is worth keeping an eye on. Looking at the daily chart, EMA activity continues to become more bullish which could see the metal climb higher once again. However, the 1300.00 zone of resistance is likely to limit just how high the metal can travel in the long run. Additionally, gold is still flirting with becoming overbought which could likewise prevent the commodity from breaking out on the upside.
Going ahead, the coming week is likely to see gold remain somewhat bullish as Brexit fears continue to circulate. After last week’s polling data saw the “out” campaign begin to pull ahead, buying pressure should continue to ramp up as traders look to shield themselves from the referendum’s fallout. However, some important US results are due out later this week which could cap gold’s upside potential.
Ultimately, the high degree of uncertainty surrounding the markets at present allows us to be mildly optimistic towards gold. From a technical standpoint, the metal is setting up to remain near the long-term resistance zone around the 1300.00 handle. From a fundamental perspective, the surge in fear resulting from the Brexit referendum is likewise keeping the commodity buoyant. Combined, these forces should keep gold relatively flat but look out for daily swings as the metal ranges in the lead up to the referendum.