Healthy Market Adjustment Expected Before Month's End

Summary:

Following the Fed's interest rate decision last Wednesday, the market swiftly embraced the Fed's stance on maintaining expectations for three rate cuts in 2024. This decision softened the US dollar and propelled gold prices to hit another historical high on Thursday before quickly retreating. As consolidation prolongs, the momentum for further short-term highs for bulls has diminished, suggesting a healthy adjustment in gold prices before the end of the month.

BUY XAUUSD

Close Time

CLOSED

2175.86

Entry Price

2220.00

2138.00

5107.16 +110.75 +2.22%

125.9

Pips

Profit

2138.00

2188.45

Exit Price

2175.86

Entry Price

2220.00

Fundamentals

After the conclusion of the Fed's monetary policy meeting last Wednesday, gold prices surged to historical highs above $2,222. However, the strong rally was short-lived as prices quickly retreated back to neutral territory, a trend that continued into Friday's trading session.

The recent rapid uptick in gold prices is attributed to the downward shift in real interest rates caused by market expectations of Fed rate cuts and robust global central bank demand for gold. Simultaneously, geopolitical tensions have been the most significant driver behind the recent rapid ascent in gold prices.

The next focus will be on the gold-buying actions of global central banks, with the most crucial indicator being the change in holdings by the People's Bank of China in March, which is a significant gauge for future market sentiment.

The latest weekly gold survey indicates a divergence in market sentiment towards gold price movements entering the final week of the first quarter, with caution prevailing among traders while retail traders are back on the bullish trend. Their views are evenly distributed, with six analysts (40%) expecting gold prices to rise this week, four analysts (27%) predicting a decline, and five experts (33%) foreseeing sideways trading or suggesting a wait-and-see approach.

Meanwhile, an online poll received 170 votes, with the majority of investors expecting gold prices to rise further this week. 117 retail investors (69%) anticipate a rise in gold prices this week, while 25 respondents (15%) predict a decline, and 28 respondents (16%) remain neutral on the near-term outlook for gold prices.

Looking ahead to this week, Monday will see the release of new home sales data, Tuesday will feature durable goods, consumer confidence index, and Richmond Fed survey data, and Wednesday will unveil MBA mortgage applications. However, Thursday, due to the Easter long weekend, will be the busiest day of the week, with the release of final fourth-quarter GDP data, initial jobless claims, pending home sales data, and the University of Michigan consumer sentiment index. Stronger-than-expected report data might provide some support for the US dollar and weigh on gold priced in dollars.

Healthy Market Adjustment Expected Before Month's End_1

Technical Analysis

From a technical standpoint, there hasn't been a significant correction in the market, and the majority of patterns still indicate bullish sentiment. Nonetheless, the current gold price is in dire need of mean reversion. Technical indicators were overbought when gold approached the $2,200 level, and it must be observed how it develops over the coming weeks.

Since March 7, the market has been trading within a narrow range of $2,146 to $2,195, with technical oscillators confirming a weakening trend. The MACD remains below the trigger line well above the zero level, while the RSI has gradually declined after climbing to the 70 level.

The rapid correction following the recent high indeed confirms either the asset's strength being short-lived or simply a "peak." We believe a healthy adjustment in gold prices may occur before the end of the month.

If the market sees further declines, it may touch the consolidation floor at $214, then the 20-day SMA at $2,130. Further downward movement would test the range of $2,088 to $2,100.

Overall, gold prices are exhibiting neutral short-term behavior, but there may be signs of a reversal in the medium term.

Trading Recommendations

Trading Direction: Long

Entry Price: 2168

Target Price: 2220

Stop Loss: 2138

Valid Until: 2024-04-08 23:55:00

Support: 2162, 2157, 2145

Resistance: 2180, 2186, 2195

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