Kira Brecht, CMT

  Monday March 13, 2017 12:25

Kitco News

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(Kitco News) - March 13 – Gold bulls are battling back Monday morning. Since marking out a minor top at $1,264.90 on Feb. 27, April Comex gold futures slid lower as the market priced in expectations for an interest rate hike from the Federal Reserve this week.  The daily uptrend off the December 2015 low remains intact and gold bulls have found a toe-hold of demand.

Drilling down to the intraday picture seen in the 60-minute chart in Figure 1 below, gold bulls have cracked a declining bear trendline. The hourly relative strength index swung higher from mid-range levels and supports a short-term bullish bias. For now, demand has emerged for gold on the retreat to test the trendline.

What's next? The burden lies on gold bulls to support follow-through buying above $1,208.90 (the last swing high) and $1,210.90, the top of the last bullish thrust. Sustained gains above $1,209.90-$1,210.90 would confirm an hourly trend change to bullish. The next upside targets for gold lie at the $1,218.30 ceiling and then the $1,227.00 area.

Macro Fireworks

The macro environment provides potential fodder for fireworks in the gold market this week and in the months ahead. Highlights from this week include:

1. Fed Meeting – the Federal Reserve is widely expected to pull the trigger on a 25 basis point rate increase at the conclusion of its two-day meeting on Wednesday. Important to monitor will be the language surrounding the rate hike and the pace of potential future interest rate increases. Currently, the market is expecting two to three rate hikes in 2017 and hints that the Fed may deviate from that path with even more tightening could weigh on gold. If the Fed chief signals that intentions remain the same for roughly two to three hikes, that would be gold-neutral, as the market has largely priced that in already.


2. The Dutch election. The Netherlands hold their general election on Wednesday. With populist and protectionist movements gaining force across Europe, the Dutch election will be viewed as an early bellwether regarding the strength of anti-European populism. Watch the outcome: the right-wing populist candidate is Gert Wilders of the People's Freedom Party. Notable elections later in 2017 include the French and German elections. A shifting tide in Europe toward protectionist economic policies would be gold-bullish. 


3. Consumer Price Index data – U.S. CPI data is slated for release Wednesday. Higher inflation readings would be gold-bullish.


4. President Trump's Budget. The president is expected to release his fiscal 2018 budget outline this week. Will deficit-hawks push back against proposals that increase the deficit? Rising deficits are bullish for gold. Read more here > Why You Should Care About The Debt Ceiling.