Gold prices are starting the new week on a slightly soft footing and remain well within the range which has framed the market over the last month, reflecting the opposing factors which have constrained the market recently. The movement in gold prices over the last week reflected a delicate balance between inflation concerns, central bank policies, economic data, and investor sentiment.

Central Bank Impact 

A weaker US Dollar on the back of the FOMC last week is no doubt welcomed by gold bulls. However, with the Fed signalling the potential for further tightening, if needed, the market failed to gain full upside momentum. Additionally, a strong rally in risk assets has seen investors moving capital out of safe-haven such as gold and into higher yielding areas such as equities and commodities.

Near-Term View

Near-term, gold prices look likely to struggle to move higher. With the focus on further central bank tightening this week (both SNB and BOE expected to hike), rising yields should keep gold prices weighed down. Into the end of the week, focus will shift to the latest round of PMI data for the US, UK and EZ. If we see any fresh weakness in these readings this might fuel some safe-haven buying for gold ahead of the weekend.

Technical Views

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For now, the market continues to hold below the broken bull channel lows and the 1973.51 level support. While this is clearly a bearish break, the move has failed to produce a deeper sell off yet with prices holding in a block of consolidation below that level in line with flattened momentum studies readings. If we do break lower, 1871.04 will be the next support to watch while, to the topside, 2069.41 is the next objective for bulls. 

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