Gold remains under pressure as Dollar strength dominates

Sunil Kumar Dixit SK Charting

Gold remains under a temporary bearish pressure affected by price stability below immediate resistance of psychological zone $4600 which is also recent high tested on 25th March.

Macroeconomic conditions continue to boost demand for Dollar and real yields remain elevated.

The rebound attempts off the lows of $4100 reaching 38.2% Fibonacci retracement at $4602 reflects a corrective pullback within a broader downward correction beginning from record high and key resistance zones are very likely to attract fresh selling interest.

The main bias seems "Sell the rallies" in the absence of a clear and strong structural breakout above $4500-$4550

Fundamental drivers

Fed's hawkish stance – Gold prices are very sensitive to monetary policies and forward guidance b Federal Reserve. Prolonged uncertainty about interest rate cuts is working in favour of real yields which in turn increase the opportunity cost of holding Gold, a non yielding asset.
Dollar strength – As Dollar index gains strength on the back of resilient economic data, Gold prices come under pressure.
Inflation concerns – As inflation remains sticky, Fed's decision making process becomes more cautious and "Higher for Longer" narrative remains in place which works against Gold prices.
Geo-political risks – Markets seem to have factored the war premium in prices and any news of de escalation or ceasefire will cause sharp correction on the drop of a hat.

Technical drivers

Price stability below 1 Hour 50 EMA $4492.
Price stability below 4 hour 50 EMA $4640.
Prices moving inside a broad descending channel leaning on trendline support.
RSI is below neutrality of 50.

Trend turns bullish if

Price makes strong breakout above $4480-$4490 with further confirmation on decisive breakout above psychological zone $4500.

Important levels to watch

Resistance $4480, $4500, $4520.

Support $4400, $4380, $4360.

Short term outlook

Gold is likely to trade sideways with temporary consolidation with a bearish bias affected by price stability below immediate resistance $4480
A strong breakout above this zone may lead to further upside recovery towards $4520-$4550 while bullish trend requires strong breakout above $4640

Author

Sunil Kumar Dixit

SK Charting

Sunil Kumar Dixit is Chief Technical Strategist and founder of SK Charting, a research firm based in India. He tracks Precious Metals, Energy, Indices and Currency Pairs. He also participates as an expert panellist on Channel Television, Nigeria.

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