The general trend of the gold price is still bullish, and as I mentioned before that the bulls moved in the price of the yellow metal (XAU/USD) towards the resistance at $1985 an ounce, as is the case now, the breach of the historical psychological resistance $2000 an ounce is soon.
- The gold market was in a tailspin as the new trading week got underway, feeling the magnitude of the recovery in the US dollar and Treasury yields.
- However, losses were trimmed as buyers stepped in to defend the $1950/oz region, suggesting that buying on dips remains the game plan among investors as the latest Fed liquidity injections work their magic.
- The price of an ounce of gold, XAU/USD, was around the $1985 level at the time of writing the analysis, and the lowest it was yesterday was the support level of $1950 an ounce.
In general, the increase in reserves by central banks may be another reason for the resilience of gold. The People’s Bank of China has been buying like a whale since last year to diversify the country’s reserves and protect it from the risks of foreign sanctions. It will be crucial to see if this pattern continues when the latest data on Chinese reserves is released on Friday.
Elsewhere, the stock market has been living in another dimension this year, as the Nasdaq 100 rose more than 20% as the first quarter closed.
Speculation is growing that the market’s decline in October last year was at the bottom of this cycle and that the recent strength in the pulse of economic data indicates that the economy is heading towards a soft landing. In fact, this amazing rally was mainly driven by a drastic change in the liquidity profile.
With the Fed opening the floodgates of liquidity and expanding its balance sheet again to protect banks, there has been an impulse to “buy everything” in riskier assets from technology stocks to Bitcoin. Once that rally fades, investors will need to grapple with how stretched valuations have become, heading for a potential earnings slump. Next on the agenda is the RBA interest rate decision early on Tuesday. The RBA is expected to hit the “pause” button on the tightening cycle, given the recent string of disappointing economic data and the risks surrounding the housing market.
The general trend of the gold price is still bullish, and as I mentioned before that the bulls moved in the price of the yellow metal (XAU/USD) towards the resistance at $1985 an ounce, as is the case now, the breach of the historical psychological resistance $2000 an ounce is soon. The increase in momentum may push prices much higher. Bearing in mind that this may move the technical indicators towards strong overbought levels, and if the US dollar recovers, it may be followed by profit-taking sales.
On the other hand, according to the performance on the daily chart below, the move of the bears towards the support levels in 1938 and 1885 is important for the general trend to turn bearish. The gold market may remain in a state of anticipation until the announcement of US job numbers by the end of the week, which will have a strong reaction on the future of US Federal Reserve policy.
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