Gold Price Prediction: Safe Haven Supports Metal, Buy Signal Plays Well! - Forex News by FX Leaders

Gold Price Prediction: Safe Haven Supports Metal, Buy Signal Plays Well!

Posted Friday, April 16, 2021 by
Arslan Butt • 3 min read

During Friday’s Asian trading session, the yellow metal managed to extend its overnight winning streak and drew some further bids around well above mid-$1,700 level as the worsening coronavirus (COVID-19) conditions in Europe and concerns over the vaccine shortages. The tussle between the U.S. and Russia and the US and China kept the market trading sentiment under pressure, which favored gold’s safe-haven demand. Furthermore, the buying of the yellow metal was also triggered by reports suggesting that Cleveland and San Francisco’s Fed policymakers felt that the road to recovery is still long.

Meanwhile, the U.S.-Tehran discussion is not showing any positive signs to solve the old problem. It may keep the U.S. and Iran’s unfriendly relations, which could further pressure the market trading sentiment and underpin the precious metal. In contrast, the previous day’s robust U.S. data releases becomes the key factor that kept the lid on any additional gains in the yellow metal prices. Also, capping the gains could be the stronger U.S. dollar as the price of gold is inversely related to the price of the U.S. dollar. However, the U.S. dollar was supported by the downbeat market mood, which increased the safe-haven demand in the market and contributed to the dollar gains. At this particular time, the yellow metal price is trading at 1,763.04 and consolidating in the range between 1,759.83 and 1,766.29.

However, the global equity markets failed to stop their early day bearish performance and remained sour during the Asian session amid Sino-US tensions and growing coronavirus vaccine concerns. On the US-Russia front, the U.S. imposed sanctions on Russia over election interference and hacking, which has recently gained major market attention. Meanwhile, President Joe Biden said to Russian President Vladimir Putin, “The U.S. could slap further sanctions, but Biden chose not to do so.” This news added to the market’s risk-off sentiment and helped gold prices to stay bid.Across the ocean, the US Center for Disease Control and Prevention (CDC) extended the ban over the use of Johnson & Johnson’s COVID-19 vaccine, which dims the hopes over the economic recovery. Furthermore, Fed policymakers from San Francisco and Cleveland warned that the road to recovery is still long, which adds further pressure on the market mood and contributes to the yellow metal gains. The reason for the downbeat trading sentiment could also be associated with worries about rising COVID-19 cases in Europe.

On the USD front, the broad-based U.S. dollar succeeded in stopping its overnight declining streak and edged higher during the Asian session as investors started to favor the safe-haven assets in the wake of risk-off market sentiment. However, the U.S. dollar gains were further bolstered by the better-than-expected U.S. economic data. However, the upticks seem rather unaffected by the Federal Reserve’s demand to keep an accommodative policy stance for a while longer. Thereby, the upticks in the U.S. dollar become the key factor that kept the lid on any additional gains as the price of gold is inversely related to the price of the U.S. dollar.

In contrast, the higher-than-expected growth in March’s U.S. retail sales month-on-month and declines in the initial jobless claims probes the market risk-off mood, which becomes the key factor that kept the lid on any additional gains in the yellow metal prices. In the meantime, China continued its economic recovery from a COVID-19 crisis. At the data front, the GDP for the 1st-quarter increased at 18.3% year-on-year and 0.6% and quarter-on-quarter individually in March. At the same time, industrial production increased 14.1% yearly.

Looking forward, the market players will keep their eyes on the release of U.S. consumer sentiment figures for April. Across the ocean, the updates surrounding the Sino-US tussle and vaccine will also be key to watch.

Gold – XAU/USD – Daily Support and Resistance

S1 1693.37
S2 1725.24
S3 1744.53
Pivot Point 1757.11
R1 1776.4
R2 1788.98
R3 1820.85
The precious metal has violated the narrow trading range of 1,749 – 1,740, and now it’s trading at 1,762 level. On the higher side, the gold is likely to face resistance at 1,769 level. A bullish breakout of this level can extend buying trend until 1,774 and 1,784 level. On the lower side, the price is likely to gain support at 1,759 area. The idea is to take a buy trade over 1,759 support levels today and even a bullish breakout of 1,769 level. Good luck!

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About the author

Arslan Butt // Index & Commodity Analyst
Arslan Butt is our Lead Commodities and Indices Analyst. Arslan is a professional market analyst and day trader. He holds an MBA in Behavioral Finance and is working towards his Ph.D. Before joining FX Leaders Arslan served as a senior analyst in a major brokerage firm. Arslan is also an experienced instructor and public speaker.
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