Fundamental Forecast for Gold:Neutral
Gold prices are virtually unchanged on the week with prices off by a mere 0.1% to trade at
In light of the recent strong demand for US Treasuries, it's disconcerting that although gold has largely moved in tandem Treasuries since the start of the year, it has been unable to participate in the bond rally since April. This condition suggests that the gold market remains vulnerable in the near-term and with the long bond coming off key near-term resistance at the 61.8% retracement from the decline off the 2012 record highs, further weakness in Treasuries could put added downside pressure on gold prices.
Looking ahead, the preliminary 1Q GDP print highlights the biggest event risk for the week ahead with consensus estimates calling for a downward revision to reflect an annual contraction of 0.5% q/q. With that said, a dismal growth read may dampen the appeal of the US Dollar and spur increased demand for gold as interest expectations get pushed out. Watch for developments in the bond market and the greenback for guidance with the recent price action in gold warning of a decisive move heading into the monthly close.
From a technical standpoint, our outlook remains unchanged from last week. "Gold has continued to trade into the apex of a multi-week consolidation pattern off the April highs and a break-out ahead of the May close is in focus. A break below 1260/70 is needed to put the broader bearish trend back into play targeting