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May Is The Month Gold Rebounds, Says This Gold Bull

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May Is The Month Gold Rebounds, Says This Gold Bull

(Kitco News) - Gold prices are overdue for a rebound, and May is the month it will happen, according to Orchid Research.

Gold prices have been under pressure in April and the tide is about to turn for May due to the dovish Federal Reserve and lower U.S. dollar, the research firm said in a Seeking Alpha post last week.

“We continue to believe that the dollar will come under downward pressure in the course of May because inflation is subdued and the Fed will continue to guide the market toward a patient attitude about its hiking cycle, which has been in pause since last December,” Orchid Research wrote.

Gold traded well below its key psychological level of $1,300 for the last few weeks, but prices managed to hold on to support levels of around $1275-85.

The reason for gold’s strength in light of higher U.S. dollar and risk-on market sentiment has been central bank buying, said Orchid Research.

“We think that gold spot prices have remained resilient in spite of the notable wave of speculative selling since mid-February. This suggests the presence of offsetting buying pressure elsewhere from the market, especially central banks, which lifted their gold buying by 7% YoY in Q1, according to the WGC,” Orchid Research pointed out.

On Monday the turnaround in gold prices has already begun, with June Comex gold futures surging 1% to $1,302 on increased safe-haven demand amid the U.S. stock market’s worst losses of 2019.

The Dow Jones Industrial Average fell 617 points to 25,325, the S&P 500 was own 2.41%, and the Nasdaq fell 3.4%. The U.S. dollar index was also down at 97.30.

The downward move in stocks and U.S. dollar was led by the failure of the U.S. and China to reach a trade deal late last week, resulting in new tariffs.

“We remain negative on the dollar … in the near term,” said Orchid Research. “We think that the current subdued inflation environment will prompt the Fed to remain on the dovish side for longer, which should eventually exert downward pressure on the dollar. Unless inflation data surprises to the upside in the near term.”

Live 24 hours gold chart [Kitco Inc.]

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