Since mid-April, gold has continued to decline and it is now around its lowest level since March. This comes as the French election fears have now faded and also recession risks have seemed to be lower for some time.
There are a few things to be said anyway though. First data from the first quarter of the US economy has clearly been mixed in terms of growth and car sales. Recent data was better, such as non-farm payrolls which printed above 200k for April and the unemployment rate fell to 4.4%. As a result, we believe markets are buying back the Fed storytelling about the rate path. President Trump is less and less at the centre stage of the markets and the Fed is clearly back in.
In Europe, the French elections provided uncertainties but it seems that as Emmanuel Macron’s victory was even larger than expected, this removed it all. Fading European political uncertainties are also sending gold lower.
Technically-wise, the yellow metal should likely monitor the $1200 level. In case of a bearish breakout, we could see gold back towards levels of around $1150.
By Yann Quelenn