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Technical Analysis

Gold Analysis – April 12 2021

Upward Channel Breakout, Bearish Bias Dominates!

On Monday, the precious metal is trading bearish at the $1,738 level, having violated the support area of $1,746. Previously on Friday (April 09), the yellow metal gold closed at $1,744.60 after placing a high of $1,750.80 and a low of $1,733.30. Gold prices fell on Friday amid the rising strength in the U.S. dollar and the U.S. Treasury yields. However, gold prices placed weekly gains for the first time in the last three weeks.

On Friday, the U.S. dollar was strong across the board because of the rising treasury yields and better-than-forecasted economic data release. The U.S. Dollar Index rose by 0.2% on the day to reach above 92.2 level. While the supported greenback ultimately weighed on the safe-haven yellow metal prices. The U.S. treasury yield on a 10-year note rose to 1.66%.

On Thursday, the Federal Reserve Chairman, Jerome Powell, reiterated that it is unlikely for inflation to reach that higher level that will require the Federal Reserve to respond with higher rates. Thus, the U.S. central bank Federal Reserve is unlikely to change its policy rate till 2023, and all of the speculations that the FED might raise interest rates are not valid. Despite these comments from Powell, the U.S. Dollar managed to hold its foot in the financial market and continued weighing on the precious metal for the day. There’s a negative correlation between gold and the U.S. dollar; thus, an improved dollar price drives selling in the precious metal gold.

On the data front, at 17:56 GMT, the Core PPI for March raised to 0.7% against the forecasted 0.2%. Whereas the PPI figures increased to 1.0% against the expected 0.5%, supporting the U.S. dollar that ultimately added additional losses in gold. At 19:00 GMT, the Final Wholesale Inventories surged to 0.6% in March against the projected 0.5%, weighing on the U.S. dollar, consequently extending support to the precious metal gold prices. Despite posting losses for the day, gold prices still ended the week higher, with 1% gains on Friday. This came in after yellow metal appeared somewhat successful from its fencing battles with the U.S. bond yields and the U.S. dollar, which remained sluggish most of the week from mixed signals on inflation.

On the flip side, the World Health Organization (WHO) has criticized the imbalanced distribution of coronavirus vaccines between rich and emerging countries. WHO has asked for a fairer allocation of vaccines, and it has been leading the Covax Scheme that is designed to provide vaccine shots to emerging nations. According to Johns Hopkins Coronavirus Research Center, the coronavirus cases world count has reached more than 135 million with about 3 million deaths from the virus. The third wave of coronavirus spread faster due to new variants and has forced many countries to reintroduce fresh lockdown measures that have deteriorated the economic recovery hopes. Eventually, this news underpins the yellow metal gold prices.

Gold Intraday Technical Level
Support Resistance
1741.60 1765.00
1726.40 1773.20
1718.20 1788.40
Pivot Point: 1749.80

Gold – XAU/USD – Technical Outlook

At the moment, the precious metal gold is trading at the $1,740 level, and on the technical side, gold has violated the support level of $1,746. As we can see on the two-hourly timeframes, the precious metal was trading in an upward channel, extending its support at $1,746. With this upward channel’s violation, the same support level is likely to work as a resistance. Below this level of $1,746, the precious metal has strong odds of bearish trend continuation until the double bottom support level of $1,731. Besides, the leading technical indicators such as Stochastic and MACD support a selling bias, along with the series of EMA (exponential moving averages), that are extending resistance at $,1746.