Gold – XAU/USD Analysis - April 21, 2021

Three White Soldiers Pattern

Gold closed at 1777.05 after placing a high of 1780.65 and a low of 1763.65. gold prices rose on Tuesday after the appeal for precious metals increased due to declining U.S. Treasury yields on the day. On Tuesday, the benchmark bond yield on a 10-year note fell to a 1.5570% level, while the U.S. Dollar Index was up by 0.2% before hitting its lowest level about seven weeks earlier in the session. The recent upward trend in gold has been driven by the fact that bonds were well bid and the U.S. dollar was under pressure.

Given the unprecedented stimulus by the central banks and the inflation associated with it, gold is considered a hedge against inflation. It tends to rise in case of the issuance of extensive stimulus measures. However, gold has been in a tussle with yields for the past six months since higher yields mean higher opportunity cost of holding non-yielding bullion.

As for the stimulus checks, most Americans received their first round of stimulus checks worth $1200 in Spring 2020, plus $500 for each child under 17 to help with the economic impact of the pandemic. As the second wave of virus emerged, the second round of stimulus checks worth $600 was issued in December 2020, the third round worth $1400 each plus $1400 per dependents of all ages started going out last month.

Since the American Rescue Plan was signed by Biden last month, more than 159 million payments worth a total of $376 billion have been delivered. Still, some found these payments not enough and reported falling short while trying to cover household expenses, as per the U.S. Census Bureau data in March 2021. After the issuance of these stimulus checks, gold should have risen and posted gains, but instead, it moved in a bearish trend and remained under pressure because of the rising treasury bond yields. Noe talks about the 4th stimulus check payments that have emerged, and it seems like they are supporting the gold prices. Congress is considering sending additional payments to those most in need once the current $1400 stimulus payments run out.

Meanwhile, Johnson & Johnson said that it would resume the rollout of its coronavirus vaccine in Europe on Tuesday. The comment came after the drug regulator of the European Union said that a warning should be added to the product, indicating a possible link to rare blood clots. Still, the benefits of the shot outweigh the risks.

The company had decided to delay distribution in Europe last week after regulators in the U.S. suspended using its vaccine in the country amid concerns about the potential side effects. The pause on using the J&J vaccine after the AstraZeneca vaccine raised doubts in the market over the economic recovery. It somehow helped safe-haven yellow metal to post gains on Tuesday.

According to Johns Hopkins University data, in the past seven days, the U.S. reported an average of more than 67,100 new coronavirus daily infections. This rate was 25% above its month-ago level, and it was alarming as the country was at the stage of vaccinating its population. These concerns also helped the safe-haven precious metal to post gains for the day.

Gold Intraday Technical Level

Support Resistance

1764.36 1781.46

1759.33 1793.53

1747.26 1798.56

Pivot Point: 1776.43

Gold - XAU/USD - Technical Outlook

Gold is trading bullish at 1,787 level, gaining immediate support at 1,775. On the 4- hour timeframe, the support is extended by 20 periods EMA (exponential moving average), and gold has formed the “Three White Soldiers” candlestick pattern that supports strong bullish sentiment among traders. Typically, such patterns trigger an upward movement in the market; therefore, the gold’s next resistance prevails at 1,789 level today. On bullish breakout of 1,789 resistance, gold’s bullish capacity increases until the next resistance level of 1,798. On the bearish side, the breakout of 1,776 support opens up room for a bearish trend until the next support area of 1,764. The MACD and RSI are supporting the bullish trend in gold today. All the best!