During Wednesday’s session gold closed slightly higher after almost an entire week of red candles. A correction from the new absolute ceiling was foreseeable, but this downward pressure seems to have already reached a slight slowdown observing the long bearish shadows of the last three candles of the precious metal.
- On Wednesday, gold ended the session slightly higher by +0.04%, returning close to the $2,340/oz level.
- From a technical point of view, after the exponential growth since mid-February, the value of gold appears to have entered a period of correction towards previous support levels.
- This week appears to be relatively calm from a macroeconomic point of view on the Euro Area front, but in the United States the national GDP growth will be announced first and then the inflation rate, respectively on Thursday 25th and Friday 26th April.
Why does the value of gold depend on the decisions of the Feds?
Lately the value of gold has undergone an exponential growth which has made the precious metal gain more than +20% in just over two months, leading it to reach a higher absolute ceiling of $2,400/oz. The regions behind this performance are multiple.
First, in recent months the Chinese central bank has bought a huge amount of gold in an attempt to increase the number of reserves at its disposal, helping to increase demand for the precious metal. Secondly, the political situation has deteriorated further, making gold more attractive due to its safe asset quality.
But what most pushed the value of gold to the stars were the press conferences of the US Federal Reserve which continued to maintain a very “dovish” attitude, that is, inclined towards an initial cut in interest rates. The prospect of a cut in interest rates has caused demand for the US dollar to collapse, which is at its lowest value since last November, increasing demand for gold.
In fact, gold and the US dollar are often seen as two alternatives when it comes to the category of safe and stable assets in value, so a collapse in demand for the dollar has caused an increase in the value of gold.
Short-Term Gold Outlook
- Current resistance level: $2,413/oz, gold’s absolute ceiling.
- Current support level: $2,190/oz, the last resistance level broken on the upside by gold.
- Upside target: $2,413/oz, gold’s absolute ceiling.
- Downside target: $2,200-$2,190/oz, the zone between the 50-day moving average and horizontal support.
Considering how the Feds have moved slightly away from their “dovish” tone lately and the value of the US dollar has recovered slightly, it is likely that the current price correction could continue, especially if Friday’s inflation data should show a lower than expected figure.
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