Gold: A dead cat bounce from 2019 lows?

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  • Reverses sharply as risk-off back in vogue on disappointing Eurozone data.
  • Technical set up suggests a minor correction likely in short-term.
  • Focus on US data, US/China trade talks.  

Gold (futures on Comex) staged a sharp $4+ reversal last hour from fresh 2019 lows of 1273.05, as a sudden turnaround in the risk sentiment called on the gold bulls for rescue amid a resurgence of concerns over dwindling Eurozone economic growth, underscored by disappointing German and Eurozone private sector activity report for April.

The recent market optimism fuelled by a positive slew of macro news from the US and China combined with upbeat US corporate earnings was quickly overshadowed by the renewed Euro area growth concerns. Therefore, markets immediately resorted to safety in the traditional safe-haven gold and propelled the prices sharply higher.

Meanwhile, the corrective move higher in the bullion is also chart-driven, as the 4-hour chart pointed to the RSI being in the oversold territory. Therefore, the prices could recover further to the next upside target of 1280 levels (round number).

However, markets view the latest uptick a dead cat bounce, as the Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund and evidence of investors’ confidence in the yellow metal, still remained around their lowest levels since Oct. 27th.

Further, the daily chart continues to back the ongoing bearish bias (as explained here). Hence, the rates could stall its corrective bounce and resume the downside in the coming days. In the meantime, the commodity traders look forward to the US retails sales, jobless claims and Philly Fed manufacturing index for near-term trading opportunities heading into the long Easter weekend.

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