Gold’s bullish price RSI divergence followed by a break above hourly 50-MA indicates doors remain open for a test of supply around daily 50-SMA of $1218.75 levels.
However, resistance at $1218.75 is likely to stay intact with re-test of $1200 levels seen likely in case prices dip below Asian session low of $1209.84 levels.
Daily RSI is still few points away from oversold territory, indicating a re-test of $1200 is likely if prices break below Asian session low.
Yellen hinted at a possible rise in June or July on Friday and that triggered a drop in the yellow metal to $1200 levels.
Investment demand is the primary determinant for the metal price. Gold needs to be looked at as a hard currency and not a metal. That makes it clear why prices rallied in Q1 – given the falling Fed rate hike bets and negative rates in Japan and Euro zone. Only a rise in interest rates could hurt gold, although resulting risk-off in equities could cap losses. As of now, financial markets are quite steady, thus rising Fed rate hike bets are hurting gold.