Sideways Trade in Gold Continues – Prepare for a Breakout!
During Asian trading hours on Wednesday, the safe haven metal price continued its positive performance from the previous session, attracting new offers above the $ 1,780 level. However, the widespread buying bias around yellow metal prices was primarily driven by ever-growing fears of the Delta Plus variant of the coronavirus (COVID-19) and concerns about the new U.S.-China feuds, which are probing the optimism in the market and contributing to the gains of the precious metal.
In addition, increases in GOLD prices were further supported after US Federal Reserve Chairman Jerome Powell confirmed that interest rates would not rise too quickly, purely because of fears of future inflation. The Fed’s new conciliatory vision acted as a tailwind for GOLD. This turned out to be one of the key factors behind the sharp rise in the price of the yellow metal. Apart from this, the reason for the rise in gold prices could also be related to the bad relationship between Australia and China, which puts downward pressure on the commercial sentiment of the market and places a safe haven offer. under gold. In contrast to this, the broadly bullish market sentiment, supported by a combination of factors, became one of the key factors that limited any further gain in the safe haven metal.
In addition to the United States, the Bank of Japan (BOJ) released the minutes of its April policy meeting earlier today. They revealed that members of the Bank of Japan agreed that the massive stimulus measures implemented by some countries could help accelerate the recovery of the Japanese and global economies. However, the widespread buying bias surrounding market sentiment was seen as one of the key factors that limited the losses in gold prices.
Even though the Fed pulled out of its Hawkish policy, the broad-based US dollar managed to extend its previous bullish bias, remaining well supported that day. It should be noted that officials at the US Federal Reserve, including President Jerome Powell, have confirmed that tightening monetary policy is still far from being achieved. Additionally, Powell and New York Fed Chairman John Williams recently warned that the economic recovery in the United States requires more time before a gradual reduction in stimulus measures and higher borrowing costs. are appropriate. The comments pushed the US dollar lower, causing it to abandon nearly a third of the large gains it had posted since last Wednesday, when the Fed surprised markets by signaling rate hikes much earlier than expected. investors had planned before. Meanwhile, supported by multiple factors, the overall positive market mood has failed to undermine the safe haven US dollar. Thus, the bullish sentiment surrounding the greenback was seen as a key factor that helped contain gold’s gains, due to the inverse relationship between the precious metal and the greenback.
On another page, ever-growing fears of the Delta Plus coronavirus variant and concerns about new Sino-U.S. Struggles continue to challenge the market’s mood for risk, and this has been seen as another key factor that gave gold prices a boost. In addition, the problems between the United States and China escalated further after Beijing failed to import the agreed volume of American goods. In the meantime, recent comments by the Chinese military regarding US warships passing through the Taiwan Strait have increased pressure on the US-China issue, providing further support for bullion prices.
Continuing, market traders will be keeping an eye out for June readings from Preliminary PMIs and FedSpeak, which may offer new direction to market sentiment. On top of that, the coronavirus headlines and business / political nervousness will also keep markets on their toes.
S1 1 751.03
Pivot Point: 1 774.13
R1 1 787.41
R3 1 846.89 On the technical side, GOLD is trading at around 1783 and gaining support at 1765. A break down at 1765 could extend the sell trend until the next support levels of 1745 and 1730. It looks like trading volume will remain limited until ‘the release of US manufacturing and services PMI figures; therefore, we can expect choppy sessions in the trading range between 1792 and 1765. However, a breakout of this range could determine other trends in the market. Both MACD and RSI support a selling trend in GOLD , while the 50 EMA remains at 1832. Consider selling below 1774 and buying above the same level. Good luck!