Market Analysis – XAUUSD
Gold quotes are correcting upward, trading at $1783 per ounce, and today, the price will be aiming to break the key resistance around 1800.00. Traders will be following closely, monitoring any major bullish breakout or loss of momentum. The asset this month has seen a large increase in value and has crossed the previous swing high, appreciating in value by almost 6%. Traders will be keeping an eye on both the asset’s correlation with the US Dollar and the stock market.
This week, there were reports that China has decided to significantly increase its physical gold imports. According to Reuters, the authorities have allowed banks to purchase an additional 150 tons of metal annually. According to the current import value, this corresponds to $8.5 Billion. According to analysts, the first import may take place in April-May this year. Although the PRC is one of the world leaders in the purchase of gold and silver, this message is alarming for investors. Beijing has repeatedly stated that it is going to create its currency, which will be backed by physical gold, and the increase in metal imports may just be one of the leading factors of this event.
Gold prices are consolidating after the multidirectional dynamics the day before, which led to a short-term renewal of local highs since February 25th. The decrease in the instrument was associated with the resumption of growth in the yields of US Treasury bonds, which had been retreating from their record highs before that. In addition, gold is losing its attractiveness as general market optimism rises, as investors look to the global economy to accelerate soon. Traders also expect US President Joe Biden to present his new $2 billion plan to modernize US infrastructure by the end of April.
Gold is known to be strongly correlated, at times, with the US Dollar and in the absence of significant releases, the movement of the US dollar is mainly technical. Investors are awaiting corporate reports from American based investment banks such as Goldman Sach and JP Morgan. One should also note today’s statements by the leader of the People’s Republic of China, Xi Jinping, who said that one or more countries should not be allowed, “to set the rules for the rest of the world” and called for a fairer and more equitable world order. Experts believe that the Chinese leader criticized the USA, although he did not indicate this directly. These statements are made at a time of aggravated US-China relations and indicate that Beijing is likely not to compromise on critical bilateral trade and economic issues.
In addition to monitoring the correlation between the Dollar and Gold, the market is also evaluating developments in the stock market as well as COVID-19. The main indices in the US such as the Nasdaq and SNP500 have declined since the start of the week and are also showing resistance during today’s European session. Traders will be looking to see how today’s earnings will affect the stock market in general and the main two indexes.
Resistance levels: 1793.0, 1845.0.
Support levels: 1757.0, 1681.0.