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Technical Analysis

Gold Analysis – April 13, 2021

Descending Triangle Breakout, Bearish Bias Dominates!

Gold prices were closed at 1732.05 after placing a high of 1745.30 and a low of 1727.15. Gold continued its bearish trend for the third consecutive session and posted losses on Monday amid the rising U.S. Treasury yields that decreased the bullion’s appeal. Meanwhile, investors were waiting for the essential U.S. inflation and retail sales data to measure the economy’s health.

Gold prices remained stuck under the key $1750 level despite the sluggish U.S. dollar. The U.S. 10-year Treasury note’s benchmark yield reached 1.685% on Monday and added weight on the metal prices as they do not produce any yield or dividend. The Treasury yields were rising due to an excellent three-year and 10-year note auction and the awaited key data about the retail sales and inflation. CPI is scheduled to release on Tuesday and Retail Sales on Thursday, and the markets were under consolidation ahead of these data releases.

Higher yields threaten the appeal for gold as an inflation hedge due to the increased opportunity cost of holding gold which pays no interest. On Sunday, the Chairman of Federal Reserve, Jerome Powell, said that he was optimistic about the U.S. economy bouncing back due to successful coronavirus vaccine campaigns; however, he was also worried about the possibility of another surge in the infection cases. Powell was worried that a hasty reopening of economies could trigger a spike in coronavirus cases.

Powell said that the U.S. economy was at a turning point because of the successful government support and speedy vaccine campaigns. He forecasted that the U.S. economic growth would be robust in the second half of this year. Powell said that the U.S. economy was at an inflection point where the growth and job creation were poised to accelerate. These comments from Powell gave strength to the U.S. dollar that ended up having a negative impression on gold prices.

On the data front, at 23:00 GMT, the Federal Budget Balance showed a deficit of -659.6B against the expected -665.5B and weighed on the U.S. dollar that capped further losses in gold prices. The U.S. Dollar Index that measures the greenback’s value against the six major currencies’ basket reached 92.33 level and weighed on the yellow metal prices on Monday. Meanwhile, over the weekend, the South China Sea’s military activity spiked as a Chinese aircraft carrier entered the region and a U.S. Navy expeditionary strike group wrapped up exercises.

Gold Intraday Technical Level
1724.36 1742.51
1716.68 1752.98
1706.21 1760.66
Pivot Point: 1734.83

Gold – XAU/USD – Technical Outlook

On the technical side, the precious metal gold is trading with a bearish bias at 1,727 level, facing immediate resistance at 1,731 level. On the 2-hour chart, the XAU/USD has closed a bearish engulfing candle that’s supporting solid bearish bias in gold. On Tuesday, the trader’s focus is likely to stay on the U.S. CPI and Core CPI figures that are scheduled to come out during the New York session today. On the lower side, the precious metal gold is likely to find support around 1,721 level, and the violation of this level can extend gold price towards 1,706 level. The leading and lagging indicators are staying in a bearish zone. Stochastic has entered the oversold area, and typically such scenarios drive a bullish correction. Gold may face resistance around 1,731 and 1,745 areas today. Further price action can be seen on the release of the U.S. inflation figures. All the best!