Gold – XAU/USD Analysis - April 19, 2021

Ascending Triangle Breakout

Gold prices were closed at 1776.90 after placing a high of 1779.50 and a low of 1770.10. Gold extended its gains and reached its highest level since February 25th on Friday amid the weak U.S. dollar and rising geopolitical tensions. The declining U.S. Dollar Index boosted the strength in gold prices on Friday; DXY fell to 91.56 on the ending day of the week. Gold also got support from its safe-haven status after the heightened tensions between world powers America and Russia. On Thursday, the U.S. announced sanctions against Russia in response to cyber-attacks and other hostile actions. According to the White House, the measure targeted dozens of Russian officials amid their harmful foreign activities. The statement issued by the White House suggested that the Russian Intelligence was behind the massive last year’s SolarWinds hack as well as Moscow also interfered in the U.S. 2020 Elections.

The sanctions were detailed in an executive order signed by President Joe Biden. This order included a ban on U.S. financial institutions from participating in the primary market for the ruble and non-ruble denominated bonds from June. The sanctions also targeted 32 entities and officials accused of trying to influence the 2020 U.S. Presidential Election. Last month, the U.S. targeted 7 Russian officials and more than a dozen government entities over the poisoning of Kremlin critic Alexei Navalny that Russia denied. This week another executive order citing sanctions on Russian officials by the U.S. added further to the tensions between world powers and called for safe-haven appeal that drove gold prices higher on Friday.

The stresses between the U.S. and Russia escalated on Friday after Russia sanctioned eight senior U.S. administration officials, including FBI director Christopher Wary and Director of National Intelligence Avril Haines. These sanctions came in response to the U.S. sanctions announced on Thursday. The rising cycle of tensions between the countries added fuel to the upward momentum in yellow metal prices on Friday. Meanwhile, the tensions between the U.S. and China over Taiwan Strait also escalated amid rising fears that Beijing might invade the island much sooner than expected. The rising geopolitical tensions around the world helped yellow metal reach the 1,800 level.

Furthermore, the U.S. dollar remained weak across the board on Friday amid the dovish comments from the Fed Chair, Jerome Powell. He reaffirmed the central bank’s commitment to keeping the loose monetary policy in place that weighed on the greenback. The interest rates will not see a surge as inflation was not that high. Millions of Americans were still out of jobs and need assistance as the nation was rebuilding from the destruction provoked by the coronavirus pandemic. The weakness in the U.S. dollar also added to the gains of precious metal on Friday.

On the data front, at 17;30 GMT, Building Permits in March remained flat with the expectations of 1.75M. In March, the Housing Starts raised to 1.74M against the forecasted 1.60M and supported the U.S. dollar, and capped further gains in gold. At 19;00 GMT, the Prelim UoM Consumer Sentiment in April dropped to 86.5 against the forecasted 88.9 and weighed on the U.S. dollar that added further gains in the yellow metal. The Prelim UoM Inflation Expectations raised in April to 3.7% against the previous 3.1%. The Treasury Department of the United States published its first foreign exchange report of President Joe Biden’s administration on Friday. The country did not designate China as a currency manipulator. The report followed the statement from Treasury Secretary Janet Yellen, who said at her confirmation hearing in January that she would oppose any attempts by foreign countries to artificially manipulate currency values to gain an unfair advantage in trade.

Gold Intraday Technical Level

Support Resistance

1719.90 1775.50

1730.00 1785.60

1719.90 1803.30

Pivot Point: 1757.80

Gold - XAU/USD - Technical Outlook

On Monday, the precious metal gold is trading sideways between a narrow trading range of 1,783 – 1,769 level. On the 4-hour timeframe, gold has formed an upward channel suggesting a bullish trend in gold and supporting it at 1,769 level. The resistance holds at 1,783 today. Gold’s next resistance holds around 1,803 level, but before this, the gold will be facing a strong hurdle at 1,783 level, the upper boundary of the trading range. The RSI (relative strength index) and the MACD (moving average convergence divergence) support a bullish trend in gold. The lagging indicators 20 and 50 EMA support the precious metal at 1,778 and 1,760 levels. Investors will be keeping an eye on the 1,783 – 1,769 trading range to trade the breakout. All the best!