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Gold regains attention after recent jump

7 April 2021

The Gold market finally regained attention after extensive price action in the previous week and once again displayed its ability to be unpredictable and strong when least expected. The yellow metal initially headed lower shedding almost $50 in value but eventually regained back the ground lost for the week ending 2nd of April.

Gold traders were rather satisfied to see uplifted price action as the precious metal had gone through most of March performing many lackluster sessions. This week’s report will be focusing on the main drivers behind Gold’s recent movement and the upcoming events that could prove interesting for Gold traders.

Solid financial data from the US in the past days, seems to have worked an unexpected trick on various markets and may have left traders puzzled for the time being. US ISM Manufacturing came out much higher than expected while on the past Friday the US employment report rocked the scene with superb figures, as the unemployment rate dropped further to 6.0%. While all this was taking place however, the greenback was slumping. The fall was also extended on Monday with the release of the record ISM services report.

Most traders may have been expecting the USD to strengthen even further yet the opposite took place. On the other hand, Gold’s price moved higher in the past three consecutive days and reached higher on Tuesday’s European morning. The bullish reaction is evident yet traders have a long way to go before reversing Gold’s trend so far in 2021.

The bullish reaction from Gold traders however, could be aligned with the overall view on the US economy by the Federal Reserve. The financial data received in the past days could possibly be better than expected and could be signaling an even faster recovery than analysts and economists predicted.

Can the Fed now be forced to change its loose monetary policy and switch to a more appropriate one, after the recent upbeat releases? This could be the message that Gold traders may have received in the past days prompting them to hit the offer button. Traders are advised to be mindful of the FED minutes to be released on the 7th of April as the event could prove useful for further clarification.On the other hand yesterday the Wall Street Journal claimed the Senate’s nonpartisan parliamentarian was in favor of a Democratic effort to pass additional legislation, opening the door for Democrats to approve more fiscal actions.

The same report states that plans of a $2.3 trillion infrastructure plan is on the table and could be announced shortly. In our opinion, announcements of any new fiscal measures can be considered a highly tradable event for Gold, possibly favoring the bears similar to what happened when the $1.9 trillion fiscal package announcement was delivered.Finally, in the next day’s important financial releases from the US could move gold’s price upon release thus caution is advised if traders are planning to place orders. On the 8th of April Thursday we get the weekly US initial jobless claims figure. Moving into the next week on Tuesday the 13th of April we get the US CPI data for March, which tends to be a decisive metric for the economy’s recovery and we expect the market to keep an eye out specifically for this event.

Technical Analysis

After the recent selloff that Gold’s price displayed, the precious metal fell to test our (S3) 1680 support level. This level was tested once more in 2021 back on the 8th of March making the support line a determining factor for the bears or bulls accordingly. However, higher we could also expect a brief stop of the price action at the (S2) 1700 round number level. Yet at the moment the yellow metal is trading above the (S1) 1720 support line which was tested extensively in March proving to be rigid, before breaking recently.

On the other hand, our first resistance is found at the (R1) 1755 level which was last tested on the 18th of March. Higher we have noted the (R2) 1775 line and even higher the (R3) 1795 barrier. At the moment, Gold’s price action is between the (R1) 1755 resistance level and the (S3) 1680 support level forming a sideways trend line. These levels even though tested have not been breached in March or April. In a more long term view however, the precious metal remains in a downward trend.



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