Weekly Technical and Fundamental Analysis of Gold – April 22
global price of gold managed to grow by over 2% in the week ending April 19. In fact, this is the fifth consecutive week that global gold is on the rise. It is worth noting that the RSI indicator in the weekly timeframe is very important and has been in the overbought zone for some time, currently showing a value of 80.
Traders are closely monitoring news related to the Islamic Republic of Iran and Israel, as well as important data from the United States for the continuation of the global gold trend in the coming week.
Events in the gold market last week
As soon as the global forex market opened last week, gold gathered momentum and started to rise. In fact, gold opened at $2344 and rose to $2387; the main reason for this was the conflict between Iran and Israel over the past weekend.
According to recent reports, the Islamic Republic of Iran retaliated against Israel’s attack on its consulate in Syria by launching a number of drones and missiles towards Israel. These missiles did not cause any damage, but this important factor fueled the movements of gold last week.
If you take a look at the daily gold chart, you will see that global gold rose by over 1.5% last Monday, achieving the highest increase in a single day.
On the same Monday, the United States released its monthly retail sales report.
According to the latest reports, retail sales in the U.S. increased by 0.7% in March. The announced figure was higher than the market’s prediction of 0.3%, causing the U.S. dollar index to show significant growth on the first working day of the week.
It is worth noting that global gold, which usually has an inverse and negative relationship with the dollar index, ignored this and continued its growth.
Since Western countries urged Israel to avoid further escalation of conflicts in the Middle East and announced plans to intensify sanctions against Iran, market sentiment improved slightly on Tuesday .
This important fundamental factor made further increases in gold on Monday difficult.
If you take a look at the daily gold chart, you will notice the formation of a long red candle on Tuesday .
It is worth noting that Shahini’s statements from the Federal Reserve officials pushed the yield on the 10-year US Treasury bonds to its highest level since early November, reaching close to 4.7%, which prevented XAU/USD from continuing its upward movement.
Jerome Powell, the head of the Federal Reserve of America, stated that recent data indicates a lack of significant progress in inflation this year.
He further added that if inflation continues to trend upwards, they can maintain interest rates within the current range for as long as necessary.
Additionally, Mary Daly, head of the Federal Reserve Bank of San Francisco, mentioned that they need to ensure that inflation is on track to reach the central bank’s 2% target before making any policy changes.
Daly continued by saying: “The worst thing we can do is act immediately when there is no need for urgent action.”
Subsequently, global gold started to correct itself downwards on Wednesday due to a lack of significant fundamental news. In fact, gold opened at $2383 and dropped to around $2354.
On Thursday, as markets were in a state of stagnation, gold did not show much reaction and traded within a narrow range (gold opened at $2361, went up to $2392, and eventually closed at $2379).
In the early hours of the Asian trading session, news of retaliatory attacks by Israelis on Iranian airspace emerged. This important factor led traders to seek a safe haven in gold.
Gold’s initial reaction to this news was an immediate surge above the key psychological level of $2400 per ounce (gold opened at $2379, went up to $2417, and eventually closed at $2392).
While Israel did not immediately confirm their retaliatory attacks on Iran, several news agencies reported that Israel carried out these attacks, citing US officials.
For this reason, the market sentiment shifted from cautious to a calm environment, and this important factor prevented gold from rising further.
A senior Iranian official told Reuters that there is no immediate plan for retaliation against this action because there has been no indication of who was behind this incident.
Later, CNN reported that a regional intelligence source told them that direct state-to-state attacks between Israel and Iran have ended.
Gold corrected down to below 2400 due to the mentioned factors on its last trading day and ended the week at a price of $2392.
Forex and gold market events this week
Traders in the financial markets will closely follow news related to wars and tensions in the Middle East this week. If you are a gold trader, do not overlook this issue because during times of war and crisis, technical analysis alone does not provide answers, and important support and resistance levels may not work as expected.
If the tension between the Islamic Republic of Iran and Israel increases for any reason this week, gold will continue its upward trend. However, gold is a safe asset and attracts many buyers in such circumstances.
Conversely, if tensions between Iran and Israel decrease, global gold will continue its correction and decline.
The first big news this week is the gross domestic product (GDP) report for the first quarter of 2024, which is due to be released by the US Bureau of Economic Analysis.
If the US economy shows stronger annual growth than analysts’ forecasts, the US dollar can maintain its current strong position and impact XAU/USD.
It should be noted that global gold has ignored the rise in the yield of US Treasury ten-year bonds since early April and the subsequent increase in the US dollar index!
If for any reason a significant and vital geopolitical factor fades in the coming week, global gold may come under downward pressure.
The idea is that if the GDP report is better than expected and the geopolitical factor fades, traders may become more confident that the Federal Reserve can maintain its rates in June within the current range, which could strengthen the dollar.
Keep in mind that according to the popular tool related to interest rates, the CME Group, there is less than a 20% chance that the Federal Reserve will cut its interest rates by 25 basis points in June.
Lastly, don’t forget that on Friday, the BEA is set to release data on the Personal Consumption Expenditures (PCE) Price Index, which is a favorite measure of inflation for the Federal Reserve for the month of March.
What is the PCE index?
Since households are one of the most essential components of the economic cycle, their choices and decisions regarding consumption are crucial for economic interpretations.
The United States has different metrics to measure inflation, with PCE being one of the most important.
The Personal Consumption Expenditures Price Index, known as PCE, evaluates changes in prices of goods and services purchased by consumers in the United States. In fact, the PCE index is used to register inflation from a wide range of consumer costs and reflects their behavior.
In general, remember that whenever the PCE index is better than market expectations, the dollar strengthens and gold begins to decline.
Of course, the GDP report on Thursday also includes the PCE index, and it is unlikely that this week’s PCE report will have an impact on the market.
Weekly technical analysis of gold
The price floor and ceiling of gold in the past week were 2324 and 2417. If you open a daily gold chart now and plot an RSI indicator, you will see that the peak of this indicator is moving upwards within the overbought zone and is showing a value of 73.
This means that control is still in the hands of market bulls, but at any moment, we should expect gold to correct from its new historical peak.
Also, if you draw an ascending channel on the daily chart right now, you will notice that global gold has broken out of its ascending channel ceiling this time and is moving significantly above its channel ceiling.
Key support levels in global ounce analysis
If gold is to decline, the first serious support level will be around $2380. If gold penetrates below this area, the next important price level is $2370. If market bears push gold lower, the next important levels will be $2360 and $2350.
Key resistance levels in global ounce gold analysis
If gold increases, the first important resistance level will be $2400. If gold successfully surpasses this area, the next important level will be $2410. If market bulls manage to push gold higher, the next resistance levels will be $2420 and $2430.
Disclaimer: This article is for informational purposes only and should not be considered financial advice. Please consult with a qualified financial advisor before making any investment decisions.
Happy trading
may the pips be ever in your favor!
