The ECB has launched QE-∞ this morning and Treasury yields have in turn sold off sharply as gold has spiked nearly 2%:
Gold (Daily)
The above trendline was tested at yesterday's lows and trend support successfully held. The $1540 level is likely to continue to serve as resistance and even with this morning's big announcement from the ECB I wouldn't expect gold to make a weekly close above $1540....yet.
Turning to another daily chart of gold with volume and technical indicators overlaid I want to point out a few of the things that gave me confidence to add to gold miners in the last couple of days:
Gold (Daily)
Once again we can see the trend line drawn from the May low but what really gave me confidence was the oversold MACD (at bottom) and the declining volume profile during gold's recent correction, a sign that sellers were losing conviction as price came down to the psychological $1500 level.
Another thing worth noting in the above chart is how the daily-RSI(14) dipped just below the median line. We have increasingly seen this occur during market corrections in 2019, the median line is NOT a hard level (50) below which one should sell. Oftentimes the daily-RSI(14) will fall to 47 or 48 before reversing sharply higher. This looks like it will be the case again today with gold.
I should also note that I expect the U.S. 10-year note yield to fall back down to at least the 1.60% area over the next week as odds of a Fed rate cut (and additional Fed rate cuts) increases, in order to keep in line with the ECB. If the Fed does not cut at least 25 bps next week the US dollar will rally and leave the US in an increasingly uncomfortable position regarding global trade. One of the few things Trump is correct about is that the US dollar is too strong right now.
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