GOLD taking profits after continuously creating highs
Updated
Gold hit a new record of $2,430 last week during the New York session. It has seen gains in seven of the past eight weeks, increasing by over 17% since mid-February. This is despite the strength of the US dollar and a hawkish repricing of US interest rate expectations. The usual negative relationship between gold and US real yields has broken down, leaving traders confused.
Geopolitical frictions in the Middle East have further bolstered gold, although these risks have intensified only recently and haven't been a predominant theme for an extended period. To add context, investors have been nervous about Iran's potential retaliation against Israel following the bombing of its embassy in Syria. Such action could escalate tensions in the region and spill over into a wider conflict.
DEEPER LOOK INTO CURRENT MARKET DRIVERS
There are several other reasons that could explain why gold has done so well this year. Here are some possible explanations for its ascent:
The Momentum Trap: Gold's relentless rise could be fueled by a self-fulfilling speculative frenzy. This trend-following behavior can create vertical rallies that are often unsustainable over the long term. Should this dynamic be at play right now, a sharp downward correction could unfold once sentiment shifts and valuations reset.
Hard landing: Some market participants may be hedging an economic downturn caused by the aggressive monetary policy tightening from 2022-2023 and the fact that policymakers could keep interest rates higher for longer in response to stalling progress on disinflation.
Inflation comeback: Gold bulls could be taking a strategic long-term approach, betting that the Fed will cut rates no matter what as insurance policy to prevent adverse developments in an election year. Cutting rates while consumer prices remain well above the 2% target risks triggering a new inflationary wave that would ultimately benefit precious metals.
![🖥 GOLD MARKET ANALYSIS AND COMMENTARY - [April 15 - April 19]](https://s3.tradingview.com/p/pTFkWbNw_mid.png)
XAUUSD TECHNICAL ANALYSIS
Gold has rallied this week, setting a new all-time high near $2,430. However, the price eventually fell to that level and closed at $2,344 on Friday. If the reversal persists in the coming trading sessions, support will emerge at $2,305, followed by $2,267. With further weakness, all eyes will be on $2,225.
On the other hand, if they rotate higher and rally again, the record high of $2,430 will be the first line of defense against further advances. With the market stretched and in overbought territory, gold may struggle to overcome this barrier, but in the event of a breakout, we could see gold prices move towards $2,500.
During the day, the upward trend of gold prices will continue to be maintained with notable technical levels as follows.
Support: 2,319 – 2,267 - 2,225USD
Resistance: 2,365 - 2,430USD
Geopolitical frictions in the Middle East have further bolstered gold, although these risks have intensified only recently and haven't been a predominant theme for an extended period. To add context, investors have been nervous about Iran's potential retaliation against Israel following the bombing of its embassy in Syria. Such action could escalate tensions in the region and spill over into a wider conflict.
DEEPER LOOK INTO CURRENT MARKET DRIVERS
There are several other reasons that could explain why gold has done so well this year. Here are some possible explanations for its ascent:
The Momentum Trap: Gold's relentless rise could be fueled by a self-fulfilling speculative frenzy. This trend-following behavior can create vertical rallies that are often unsustainable over the long term. Should this dynamic be at play right now, a sharp downward correction could unfold once sentiment shifts and valuations reset.
Hard landing: Some market participants may be hedging an economic downturn caused by the aggressive monetary policy tightening from 2022-2023 and the fact that policymakers could keep interest rates higher for longer in response to stalling progress on disinflation.
Inflation comeback: Gold bulls could be taking a strategic long-term approach, betting that the Fed will cut rates no matter what as insurance policy to prevent adverse developments in an election year. Cutting rates while consumer prices remain well above the 2% target risks triggering a new inflationary wave that would ultimately benefit precious metals.
XAUUSD TECHNICAL ANALYSISGold has rallied this week, setting a new all-time high near $2,430. However, the price eventually fell to that level and closed at $2,344 on Friday. If the reversal persists in the coming trading sessions, support will emerge at $2,305, followed by $2,267. With further weakness, all eyes will be on $2,225.
On the other hand, if they rotate higher and rally again, the record high of $2,430 will be the first line of defense against further advances. With the market stretched and in overbought territory, gold may struggle to overcome this barrier, but in the event of a breakout, we could see gold prices move towards $2,500.
During the day, the upward trend of gold prices will continue to be maintained with notable technical levels as follows.
Support: 2,319 – 2,267 - 2,225USD
Resistance: 2,365 - 2,430USD
Note
Gold falls below $2,349Gold turned down to below $2,349 from above $2,362 in the European session
The market awaits US retail sales data and Empire State manufacturing data released this evening
Note
Gold prices have been supported by other factors including strong buying by central banks, rising demand from Chinese consumers and rising geopolitical risks.Note
Note
🟢Gold prices rose to approach the record high level recorded last week- The rise was supported by concerns about escalating geopolitical tensions between Iran and Israel
- Gold in spot transactions rose 0.2% to $2,387.11 per ounce, and US gold futures contracts increased 0.9% to $2,403.90.
Note
Fed data showed output at factories, mines and utilities rose 0.4%, matching the previous month's revised gain. Mining and energy extraction decreased, while public service output increased.Note
✴️ [Breaking News] - ECB's Schnabel : It may be prudent to continue to treat the Baseline Forecast as just an input for policy decisions or consider other changes to the framework, including in communications information, even as inflation continues to decline.Note
This official still expects inflation to fall further but wants more data to strengthen confidence that inflation will return to the Fed's 2% target. "A strong economy and labor market are enabling the Fed to be patient with policy," she said.Note
According to Labor Department data, initial claims stood at 212,000 last week, below economists' forecast of 215,000. Applications for continued benefits stood at 1.81 million in the week ending April 6.
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