Gold traded at an intraday high of $2,078 on Tuesday, March 8, roughly $10 below the all-time high of $2,088 reached in August 2020. However, gold saw its first real price drop since January, when it slumped to around $1,780. Experienced analyst Gary Wagner’s X-ray analysis of gold, in his own words cryptocoin.com We have prepared for our readers.
Why did the fall in gold prices occur?
Until Tuesday of this week, a dynamic rally in February caused gold to gain around $300 when it was trading at $2,078. On Wednesday, March 9, gold opened above Tuesday’s close of $2,043 but closed significantly lower, resulting in a price drop of $72. Tuesday’s strong drop caused gold to tumble 3.49%, the biggest single-day loss in 2022.
The most active April Comex contract, based on EST gold futures, is currently pegged at $1,989.20, down 0.75%. However, this decline can be largely attributed to the strength of the dollar. Currently, the dollar is up 0.63% and the dollar index is fixed at 99.12. Although gold prices are lower these days, this is purely a result of dollar strength and partial gold purchases.
Currently, spot gold is pegged at $1,988.60, down $8.60 on the day. The Kitco Gold Index shows that dollar strength resulted in gold falling $12.40 and partial purchases resulted in a gain of $3.80, resulting in a net change of $8.60 today.
“Yellow metal entered full bull trend in the last week of February”
This week’s price action marked the start of the first correction since late January. Currently, gold is down about 0.382% from Tuesday’s intraday high of $2,078 to today’s low of $1,960. 0.382% is an important Fibonacci retracement number. A shallow price correction based on Fibonacci retracement levels will start at 0.236%, followed by a 0.382% drop and a strong retracement to 0.618% or 0.78%. Technically, these four Fibonacci retracement levels are the most important numbers to focus on. Technical traders use these levels to monitor possible support levels that could indicate a correction result.
However, based on a study of three different moving averages (50-days, 100-days, and 200-days), gold is still in full bullish lines. Market technicians use 50-day, 100-day and 200-day moving averages as a benchmark to determine short-term, interim and long-term market sentiment. If the current price of a stock or commodity is above the 50-day moving average, market technicians interpret short-term market sentiment as bullish. The 100-day moving average is used to determine interim market sentiment, and the 200-day moving average reveals long-term market sentiment. If 50-day is above 100-day and 100-day is above 200-day, it is interpreted as a full bullish trend.
The second chart is a daily candlestick chart of gold futures, which clearly shows that gold is right in the bullish line. The 50-day moving average is currently pegged at $1,861.70, followed by the 100-day moving average at $1,832.20 and the 200-day moving average at $1,816.10. Gold prices entered a full bullish trend in the last week of February, when the 100-day moving average climbed above the 200-day moving average. As gold prices continue to rise, we can see that the three moving averages are in a divergence period, which means that the price between each moving average is increasing.
Based on the two technical studies we discussed above, we can draw the following conclusion. First, on a technical basis, the gold futures low touched the 0.382% Fibonacci retracement level, which is acceptable if this current correction turns out to be a shallow correction, as seen in chart 1. It doesn’t confirm that pricing will stabilize here, but it’s an important level to watch if gold prices are at or trading below this level ($1,964). Second, despite this week’s correction, which resulted in a 5.48% drop in pricing from Tuesday’s high to today’s low, the three moving averages are still in full bullish lines, as seen in chart 2.
Finally, while we might see more price drops technically speaking, this week’s price drop didn’t do much damage to the chart, but it did lead to a price correction from Tuesday’s intraday high.
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