Gold Price Forecast – Upward Channel to Support the Metal, Brace for a Buy!
During Friday’s Asian trading session, the precious metal gold failed to extend its overnight winning streak. It took some offers under the $1,770 level as investors continue to observe ongoing progress on a $1.8 trillion stimulus plan proposed by U.S. President Joe Biden earlier in the week, which tends to undermine the safe-haven demand and contributed to losses. Meanwhile, the buying bias surrounding the U.S. dollar could also be seen as one of the key factors that kept the yellow metal prices under pressure as the price of GOLD is inversely related to the price of the U.S. dollar.
Apart from this, the optimism over faster vaccinations in the West and BioNTech’s hope of finding a cure to India’s ‘double-mutant’ virus strain also played a major role in undermining the safe haven yellow metal prices. Conversely, the prevalent trade/political war between the West and China and ever-increasing coronavirus (COVID-19) numbers in Asian countries raised doubts over the global economic recovery, which may help gold prices to limit their deeper losses. Additionally, the slew of economic data from China and Japan exerted downside pressure on the market trading sentiment, which becomes the key factor that kept the lid on any additional losses in the bullion prices. As of writing, the yellow metal prices are currently trading at 1,768.49 and consolidates in the range between 1,765.53 and 1,773.72.
The market trading mood failed to extend its previous day’s positive performance and turned sour on the day. However, the downfall was completely sponsored by the recently spreading virus variants from India, Japan, and Brazil, which fueled doubts about the global economy’s recovery. As per the latest data from Johns Hopkins University, the number of global cases exceeded the 150 million mark as of April 30. Additionally, spoiling the mood could be the downbeat economic data from China and Japan, which suggest a slowdown in the pace of growth. These concerns keep fueling the worries over the global economic recovery and exert downside pressure on the market trading sentiment. At the data front, the Chinese manufacturing Purchasing Managers Index (PMI) for April was 51.1, and the non-manufacturing PMI was 54.9. The Caixin manufacturing PMI for April was 51.9, and the Caixin services PMI is due in the following week. In Japan, industrial production rose 2.2% month-on-month in March, and the Tokyo core Consumer Price Index declined 0.2% year-on-year in April.
In addition, the reason for the pessimistic trading mood could also be associated with the long-lasting West-China tussle, which is still not showing any signs of slowing down. Meanwhile, China’s latest rules for technology companies and payment processors seem to have recently weighed on the market sentiment. All these factors have been weighing on the sentiment and were seen as significant factors that kept the U.S. dollar prices higher.
At the USD front, the broad-based U.S. dollar managed to extend its previous day’s bullish bias and drew some further bids on the day as the market risk-off mood increased the safe haven demand for the greenback. However, the gains in the U.S. dollar become the key factor that kept the gold prices lower. The U.S. Dollar Index that tracks the greenback against a bucket of other currencies rose by 0.03% to 90.618 by 12:26 AM ET (4:26 AM GMT).
Apart from this, the losses in the yellow metal prices could also be associated with the optimism over faster vaccinations in the West, BioNTech’s expectation of finding a cure to India’s ‘double-mutant virus’, and hopes regarding the U.S. President Joe Biden’s stimulus package. Meanwhile, the previously released upbeat U.S. data keeps challenging the market risk-off mood, which was also seen as one of the key factors that kept gold under pressure. Looking forward, the market traders will keep their eyes on the release of the GDP figures from the Eurozone and second-tier data from the US. In addition, the updates about the U.S. stimulus package will also be key to watch.
Gold Daily Support and Resistance
S1 1711.94
S2 1741.68
S3 1756.89
Pivot Point 1771.42
R1 1786.63
R2 1801.17
R3 1830.91
The precious metal gold is trading with a strong bearish bias at 1,777 level. On the 4-hour timeframe, the pair has violated an upward channel that was supporting the precious metal at 1,780 level. For now, it may encounter resistance at the same support become resistance level. On the lower side, GOLD can gain immediate support at 1,767, and violation of this level can extend further selling trends until 1,749. Since the MACD and RSI were also supporting a bearish trend, we decided to open a sell signal around 1,776. The idea is to target the 1778.89 level with a stop loss of around 1788.89. Good luck!
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