Gold Price Analysis: Gold stalls due to the positive risk tone and fails to capitalise on the weaker US dollar
- Gold trades 0.60% lower despite a fall in the USD at the start of the week.
- The risk environment is positive as all the major bourses trade higher.
Fundamental backdrop
Risk sentiment is positive at the start of the week as all of major Asian, EU and American bourses trade higher. Gold has fallen today off the back of the aforementioned risk tone and failed to capitalise on the weakness in the greenback (USD). In the FX world, the US dollar underperformed especially against the EM currencies. USD/ZAR is down almost 1%, USD/INR and USD/RUB are both negative on the session too.
It seems that the fact that more countries have plans to open their respective economies is one of the main factors in the positive mood. Although, New York mayor Cuomo has said the state will not be ready to even look at opening some parts of the area till the middle of May. Italy which is been the second most affected country has announced their plans to reopen more of their economy too.
Italy COVID-19 cases rise by 0.9% to 199,414 (prev. +1.2% at 197,675) and the death toll rises 1.3% to 26,077 (prev. +1.0% at 26,644).
The UK COVID-19 death toll rises to 21,092 (prev. 20,732) and deaths rise by 360 (+1.72%) vs. the previous increase of 413 (+2.03%).
Technical Picture
Gold has once again pulled away from the recent wave high and has posted a lower high wave. The price waves are circled in black on the 4-hour chart below and as you can see the peaks are falling steadily. The key support level is now USD 1661.18 as if it breaks it will make a lower high lower low pattern.
Interestingly, the first retracement stopped very close to the 76.4% Fibonacci retracement. This means that this move lower could be the start of a new Elliott Wave pattern to the downside. If this is the case a break of USD 1661.18 would be the 3rd wave and this move lower could potentially lead to a deeper retracement.
As this is a 4-hour chart it could take a few days to materialize and at the moment the 55 exponential moving average and USD 1700 psychological level are working well to support the price. All of this bearishness could be negated if USD 1739.00 gets broken to the upside to if you are looking for a resistance that would be the level to keep an eye on.
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Additional levels
Author
Rajan Dhall, MSTA
FX Daily
Rajan Dhall is an experienced market analyst, who has been trading professionally since 2007 managing various funds producing exceptional returns.
