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Daily Brief, May 14: Things You Need to Know About Gold Today

What’s up, fellas.

Gold prices closed at 1716.25after placing a high of 1718.11 and a low of 1699.09. Overall the movement remained bullish throughout the day. GOLD extended its previous day gains on Wednesday and showed a movement of about $19 on the upside. The upward trend of gold could be attributed to the Federal Reserve’s warning about the recovery of the US economy.

On Wednesday, the Chairman of Federal Reserve, Jerome Powell, gave a speech at the Peterson Institute for International Economics. The speech was totally focused on the economic condition and the recent damage caused by the coronavirus crisis over the economy.

Powell started his speech with a warning that the US economy could be stuck in a recession for a prolonged period of time if the White House and Congress do not authorize more aid to reduce the effect of coronavirus crisis. He stressed that though the additional support would be expensive, it would be worth it to avoid the long-term economic damage and would also help in quick recovery. The statement by Powell contradicted with the optimistic statements from Trump and senior officials who portrayed that a dramatic economic recovery will occur later this year, and it would pick up even more momentum in 2021.

Powell added that a longer and deeper recession could impose lasting damage on the productive capacity of the economy. He also showed his concerns about the domino effect of less spending leading towards shutting down of firms and stressed the need for additional fiscal aid from the government. White House and Congress have already approved nearly $3 trillion of additional spending since March to reduce the effect of coronavirus crisis and they are waiting to see whether these programs are having an impact.

Powell said that the downturn in the economy caused by the pandemic was “significantly worse” than any recession since World War II. He replied to the calls made by US President Donald Trump to reduce rates below zero by saying that this tool has not been proven effective yet, but Fed will continue using stimulus to help its economy through the crisis.

The market acted in favor of gold prices due to the grim assessment of the economic outlook. The US dollar also moved in the same direction as gold on the back of the Fed’s commitment to using its tools to the fullest until the economy recovers. The US Dollar Index, which measures the value of the dollar against the basket of six currencies, gained 0.4% to100.305 level on Wednesday.

On the other hand, data from the US also remained supportive of gold prices on Wednesday. At 17:30 GMT, the Core Producer Price Index from the United States showed a decline by -0.3% against the forecast decline by -0.1% in the month of April and weighed on the US dollar.

The Producer Price Index for April also dropped to -1.3% against expectations of -0.5%. The worse than expected decline in the Producer Price Index was almost ignored by the investors; however, they managed to lift gold prices a bit on Wednesday.

Daily Technical Levels
Support Resistance
1709.49 1735.49
1692.62 1744.62
1683.49 1761.49
Pivot Point: 1718.62

The precious metal gold showed significant gains to violate the double top resistance level of 1,710 level, and closing of candles over this level opens up further room for buying until the next resistance level of 1,722. However, traders may do some profit-taking before placing further bullish bets until 50% and 61.8% Fibonacci retracement levels, which hold around 1,709 and 1,707 respectively.

Good luck!

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Arslan Butt
Index & Commodity Analyst
Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics.His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker.His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.
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