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XAUUSD: Rise in Gold Prices Was in Line with Our Expectations, with Bulls Still Dominating
CommodityBanking Crisis in Europe and AmericaInflation and RecessionCentral Bank Policy TrendsThe FedEconomic Trends
Summary:
Central banks have pegged inflation at less than 2%, causing chaos in economic and financial markets. The balance between inflation, growth, and financial pressure will shape the gold market.
CLOSED
1967.67
ENTRY
2006.00
TGT
1918.00
SL
1964.29 +1.11 +0.05%
92
Points
Profit
1918.00
SL
1968.59
CLOSING
1967.67
ENTRY
2006.00
TGT
Fundamentals
Financial markets have had a steady start this week. The banking turmoil no longer seems to be headline news, but the debate among policymakers over whether to tighten or loosen monetary policy under sticky inflation data continues to unsettle market speculation.
The recent volatility in financial markets is likely to continue as investors' expectations of future interest rates remain uncertain. All central bankers, especially the Federal Reserve, have refused to point out a clear path for their monetary policy at recent meetings, and markets are trying to figure out what that means.
Jeremy de Pessemier, an asset allocation strategist at the World Gold Council, analyzed the impact of this ambiguity on the gold outlook in an article published on the WGC website. De Pessemier said that although "how long the Fed will keep interest rates high" was "unknown", the Fed "is under a lot of pressure to fight inflation" and "avoid a repeat of the 1970s".
However, he also admitted that "lowering the inflation rate to 2% is causing chaos in the economic and financial markets". "We may be close to the peak of interest rates". If this is true, gold will be supported, especially if accompanied by a mild recession. He believes that determining "the extent to which the crisis of the past week has led banks to tighten credit" is a "key issue" in understanding which market we will live in.
His analysis concluded that the short-term development of "growth and inflation" would determine the direct trend of gold prices. Nevertheless, it also points to the long-term bullish scenario for gold prices:
He said: "In the long run, gold is playing a key role as the mainstay of strategic long-term investment and diversified portfolio allocation. While investors have been able to recognize most of the value of gold during periods of market pressure, structural dynamics pointing to a low-growth and low-yield environment should also support gold prices ".
We believe that the rise in gold prices indicates that the market is looking for a "safe haven" from the banking crisis, which remains one of the major threats to the global economy. Moreover, the Fed's ambiguous stance on future interest rates makes gold attractive to investors.
European banks came under renewed pressure over the weekend, raising anxiety in global stock markets. The concern was sparked by the fall in the share price of Deutsche Bank, Europe's largest bank.
Against this background of uncertainty, gold has once again become a "safe haven" in the capital market, which makes it one of the most demanding investment assets in the face of economic uncertainty. We believe that gold prices may continue to rise in the near term until financial markets stabilize.
Technical Analysis
The upward trend of gold is still positive, reaching higher highs and lower lows in the past turbulent week. The latest price pullback is near the 23.6% Fibonacci level that rebounded from March 8 to 17, or around US$1,950. This level proved to be a relevant support as it coincided with the swing high on February 1, indicating that the gold bulls remained dominant.
At the same time, the gold price rebounded after rising a little over US$1,944 in the early days of Monday's test, which is in line with our expectations. A consolidation range is currently being formed around it. As bears continue to weaken, bulls may push further prices to the upper edge of the triangle consolidation range. Technically, the stochastics confirm this. Its signal line opens upwards above 20. It is recommended to buy at the lows.
Trading Recommendations
Trading direction: Long
Entry price: 1957
Target price: 2006
Stop loss: 1918
Deadline: 2022-04-11 23:55:00
Support: 1934, 1927, 1918
Resistance: 1962, 1980, 2003
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You understand and acknowledge that there is a high degree of risk involved in trading with strategies. Following any strategies or investment methodologies is the potential for loss. The content on the site is being provided by our contributors and analysts for information purposes only. You alone are solely responsible for determining whether any trading assets, or securities, or strategy, or any other product is suitable for you based on your investment objectives and financial situation.
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Master of Economics, 8 years in the financial industry, CFA holder, joined HSBC (Hong Kong) Bank in 2013 after graduating from the University of California, USA in the Investment Research and Markets Department. With years of financial market experience and trading experience, having provided excellent investment advice to many brokerages, entity derivatives importers and clients in Greater China.
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PROFIT +3940 Points
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