Gold dives despite market turmoil while Dollar surges

22 April, 2020

Gold struggled to shine on Tuesday, falling more than 1% as chaos in the oil markets triggered panic selling across the board and forced investors to raise cash to cover margin calls.

The historic collapse in Oil prices and rising fears over a severe global recession may create another dash for cash, essentially exposing Gold prices to downside shocks. Although the unfavourable global macroeconomic conditions, chaos surrounding the coronavirus outbreak and gloomy outlook for Oil markets could accelerate the flight to safety, Gold may not be the first destination of choice for investors.

Looking at the technical picture, the precious metal is descending lower on the daily timeframe with prices trading around below $1675 as of writing. Sustained weakness below this level could encourage a decline towards $1650 and $1635. 

Alternatively, a breakout back above $1675 should trigger a move back to the psychological $1700 level.

Dash for cash boosts Dollar 

Everyone wanted a piece of the Greenback after the collapse in Oil prices compounded sent tremors across the board.

The selloff witnessed in Oil prices were so severe and unthinkable that investors sprinted towards the safe embrace of the world’s most liquid currency. Appetite towards the Dollar should remain stimulated by the prevalent themes weighing heavily on investor confidence. As the general uncertainty and unease foster widespread caution, King Dollar is positioned to shine through the chaos.

Focusing on the technical picture, the Dollar Index is pushing higher on the daily charts. A decisive daily close above 101.0 could open the doors towards 103.0. Should 101.0 prove to be reliable resistance, prices could sink back towards 99.90.

Currency spotlight – GBPUSD

Sterling tumbling over 1% against the Dollar on Tuesday and weakened against almost every single G10 as general unease and risk aversion guided investors to more liquid currencies.

Appetite towards the Pound is likely to deteriorate further on Brexit uncertainty and fears around the United Kingdom plunging into an economic recession. As the Dollar appreciate on the safe-haven demand, this could only mean more pain for the British Pound.

Technical traders will continue to observe how the GBPUSD behaves around 1.2300. Weakness under this level should open a path towards 1.2200 and lower. Alternatively, a rebound back above 1.2400 could signal an incline towards 1.2500.

Q2 set to end on risk-on note30 Jun, 2020  

Asian stocks are advancing on the final trading day of June, after a positive session on Wall Street, with market sentiment buoyed further by China's better-than-expected June PMI readings.

Beware Quadruple Witching: More volatility ahead?19 Jun, 2020  

Heightened volatility has been a staple of US equities since March, with the VIX index staying stubbornly higher compared to its long-term average of sub-20 levels...

Will the second wave of Covid-19 end the current rally?19 Jun, 2020  

It has been one hundred days since the WHO declared the coronavirus outbreak a pandemic. During this time, we experienced the worst sell-off and fastest...

To believe or not to believe in virus vaccine hopes?20 May, 2020  

The euphoria that roared across financial market sentiment throughout yesterday and encouraged huge rallies in major U.S stock markets is running thin on flames today...

Gold blasts to new highs but can this joy last?19 May, 2020  

Investors are happy to add risk into portfolios with stocks and oil prices cheering this sentiment but at the same time, gold has reached its highest level...

Will the clock unveil more COVID-19 cases as restrictions ease?12 May, 2020  

Market volatility remains muted, however the crossroads appear to be getting closer where questions will be asked if eased restrictions are contributing...

Sell in May and go away?4 May, 2020  

On Covid-19 related news, states across the US are taking steps to restart the economy by easing stay-at- home orders and allowing non-essential businesses to reopen...

Will markets follow Pied Piper Powell?29 Apr, 2020  

The Dollar is weaker against all G10 and Asian currencies ahead of today's Fed rate decision and the US Q1 GDP announcement. The Dollar index (DXY) has been...

Gold Daily: Bullish sentiment prevailing15 Apr, 2020  

The price of Gold, on the D1 time-frame, made a short-lived downward shift until March 16 when a lower bottom was recorded at 1451.13. Buyers found the price attractive...