Gold report: Gold tests new April low

Gold prices slid on Monday essentially following up on the downtrend that was carried out in the past week. It is evident that some of the economic developments in the past week had affected traders leading Gold’s price course into a selloff. In this report, we will identify and bring to light the key topics moving the Gold market allowing us to perform a brief and useful outlook for traders to work with. As a closing, our technical analysis will assist traders with specific price levels to keep in mind.

We commence with the very notable strength of the greenback in the past week. The greenback surged across the board and may have acted as a solid antagonistic movement for Gold’s price. The two instruments have traditionally kept an antagonistic nature and moved in the opposite directions, but not always.  The USD Index has moved higher for the past three consecutive weeks and has moved to a new two-year high in the current week so far. So, the question here is what is driving the USD higher? First, market participants are seeing evidence that the Fed is probably about to move in a more aggressive stance with its interest rate. In the past week, during the IMF meeting, FOMC chairman Jerome Powell hinted for a double rate hike being on the table in the upcoming Fed meeting. Moreover, the Fed’s $9 trillion balance sheet is expected to drop notably with the FOMC moving into a tightening stance. With all these actions expected to unfold in the incoming months and the USD gradually strengthening, Gold’s value may depreciate in the short term. In our opinion, the recent Gold selloff is a rather temporary and emotional reaction by traders as some risks or uncertainties may not be carefully considered at the moment. Lifting interest rates too high and too fast could possibly destabilize other segments of the economy which are currently enjoying favorable circumstances. For example, the job market. Or in a different scenario may fail to bring Inflation lower which is currently the main target of the Fed. Higher inflation is currently driven mostly by energy prices and raw material bottlenecks which could be challenging to deal with since they relate to global dynamics. Thus, even though the selloff for Gold was notable in the past days, we could say it is still controlled. However, there is a general sentiment that some of the largest central banks in the world including the FOMC, BoE, BoC, the ECB, and others will gravitate towards interest rate hikes in the next months. Gold traders may be driven toward this notion, but it may depend on how aggressive their steps will be.

A matter that continues to hold bullish possibilities for Gold traders is the ongoing Russian military tensions in Ukraine. More money is currently thrown into the war from both sides, a reason for us to believe the situation is probably to persist. Today, a report by Reuters quoted Russian Foreign Minister Sergei Lavrov warning western powers over elevated chances of a nuclear conflict. In such a scenario we could see Gold prices jumping abruptly. Even headlines of consideration for the use of nuclear weapons can support Gold prices therefore we suggest traders pay extra attention to developments on this front.

In the following days, traders have a number of important economic releases coming up, that could potentially create volatility for the Gold market. On the 28    of April, we get the US GDP Advanced rate and the Core PCE Prices Advance rate both for Q1, while the weekly Initial Jobless claims figure is also to be released.  On the 29    of April, we get the Consumption, Adjusted rate for March, and the Final UoM Economic Sentiment figure for April. On the 2  of May, we get the important ISM Manufacturing PMI figure and the Final Manufacturing PMI both for April.

テクニカル分析

XAUUSD H4 chart

Gold is currently trading between our (R1) 1970 resistance and our (S1) 1940 support level. On Monday a brief upward movement sent the price action reaching the (R1) yet a correction lower was soon carried out. However, the (R1) 1970 line has not been tested since March the 14    making it a strong buying indicator for traders, if the level is to be actually surpassed. In an extended buying trend scenario, traders could also target the (R2) 2000 resistance level or even higher the (R3) 2020 barrier. On the opposite side, a selling scenario could force the price action towards the (S1) 1940 support level which was targeted various times in the past week and was used as both resistance and support. Lower the (S2) 1915 support is the lowest level Gold has dropped to in April making it an accurate metric for a selling trend. If the (S2) is breached, the price action could be signaling a change of trend to a selling one making the (S3) 1895 a target. Overall, our personal view is that Gold remains in a sideways motion but due to the recent high it jumped to on Monday, it could also be driven by some bullish tendencies. Besides, the RSI indicator below our chart is currently running across the 63 levels, implying some bullish appetite may still be in play.

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