Gold Technical Analysis: Renewed Geopolitical Concerns

Mahmoud Abdallah

The price of gold, despite its recent gains, is still in need of more momentum to confirm the upward shift in the trend.

Despite the gains of the US dollar, the price of gold succeeded in moving towards the $1755 resistance level during last week's trading, before closing steadily around $1745. Despite this performance, the price of gold is still under bearish pressure, most recently because of the dollar and what happened in the bond market. Gold futures rose to their highest level in three weeks as the dollar gave back some of its gains and long-term bond yields stabilized slightly. Accordingly, gold futures rose 1.3% for the week.

US bond yields retreated from their 14-month highs reached the previous day in response to the Fed's decision to allow inflation to rise more than usual. Therefore, the 10-year Treasury bond yield declined after economic data proved that the economy is still suffering from the effects of the pandemic.

In contrast, silver futures closed lower at $26,321 an ounce, while copper futures settled at $4.1130 per pound.

Data released by the US Labor Department showed that first-time claims for US unemployment benefits increased unexpectedly in the week ending March 13th. The report said that initial jobless claims rose to 770,000, an increase of 45,000 over the previous week's revised level of 725,000. Economists had expected jobless claims to drop to 700,000 from the 712,000 reported in the previous week.

The Federal Reserve Bank of Philadelphia revealed that a reading on manufacturing activity in the Philadelphia area rose to its highest level in nearly 50 years in March. Accordingly, the Federal Reserve Bank of Philadelphia said that an index measuring current activity rose to 51.8 in March from 23.1 in February, with a positive reading indicating growth in regional manufacturing activity. Economists had expected the index to come in unchanged. With the significant increase, the Philly Fed Index rose to its highest level since hitting 53.6 in April of 1973.

The rally by the Headline Index came as the New Orders Index also jumped to its highest level in nearly 50 years, rising to 50.9 in March from 23.4 in February. The Shipments Index rose to 30.2 in March from 21.5 in February, while the Headcount Index rose to 30.1 from 25.3. On the inflation front, the Paid Price Index jumped to 75.9 in March from 54.4 in February, reaching its highest level since March 1980. The Received Price Index also jumped to 31.8 from 16.7.

Also, the Philadelphia Federal Reserve said that the future indicators of the survey indicate more optimism about the continuation of growth over the next six months. “Looking to the future, strong demand for goods, increased business investment, and generous federal relief from the pandemic will lead to sustainable regional industrial growth,” said Oren Klashkin, Chief US Economist at Oxford Economics.

Technical analysis of gold:

On the daily chart, the price of gold, despite its recent gains, is still in need of more momentum to confirm the upward shift in the trend, and this may happen if the price moves steadily above the psychological resistance level of $1800. On the downside, the support level of $1660 is still the most important target for bears to complete the current trend path. I still prefer to buy gold from every downside. On the four-hour chart, the price of gold is still in a neutral range, pending any new developments.

The price of gold will be affected today by the strength of the dollar, the extent of investor risk appetite for risk, and the statements of US Federal Reserve Chairman Jerome Powell and a number of bank officials.

Gold

Mahmoud Abdallah
Mahmoud has been working fulltime in the Foreign Exchange markets for 12 years. Offers his analysis, articles and recommendations at the most renewed Arabic websites specialized in the global financial markets, and his experience gained a lot of interest among Arab traders. Works on providing technical analysis, market news, free signals and more with follow up for at least 12 hours a day, and aims to simplify forex trading and the concept of trading for his audience.

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