cryptocoin.com As we reported, gold prices fell on Friday heading for its worst week since late November as demand for a safe haven slackened, fueled by the Russian invasion of Ukraine. Spot gold was down 0.4% daily at $1,934.62 at the time of writing, while US gold futures fell 0.4% to $1,935.00 at the time of writing.
“The direction of gold prices is down in the very short term”
“The situation in Ukraine isn’t as intense as it used to be, so there’s really no concern about making gold a safe haven,” commented Matt Simpson, senior market analyst at City Index. Russian troops halted their advance on Ukrainian cities as the war entered its fourth week.
Stock markets took a breather after a few days of big gains as the dollar strengthened and suppressed dollar-priced bullion. Gold prices are down about 2.6% so far this week as investors priced in the possibility of an aggressive US Federal Reserve rate hike ahead of Wednesday’s policy decision.
However, the precious metal rebounded slightly after the Fed acknowledged raising borrowing costs in line with expectations and acknowledging challenges from rising inflation. On the other hand, Michael McCarthy, chief strategy officer of Australian Tiger Brokers, comments:
The combination of higher interest rates throughout the year and gold rejection levels near all-time highs means gold prices are bearish in the very short term.
Ross Norman: Gold ETF flows are really positive
Miguel Perez-Santalla, head of commercial sales and marketing at Heraeus Metals Management in New York, says people are starting to pile on as a weak dollar and the situation in Ukraine still linger in the background.
While rising US interest rates normally tend to put pressure on gold as it increases the opportunity cost of holding the non-yielding asset, investors in bullion seemed to be taking the Fed’s rate hike in stride, given that it mostly aims to combat rising inflation. Independent analyst Ross Norman comments:
If you had to look at just one thing to encourage you that this bull run has legs, you’d be looking at gold ETF flows, and it’s really positive.
The holdings of SPDR Gold Trust, the world’s largest gold-backed ETF, rose to the highest level since March 2021 at 1,070.53 tons.
Short-term momentum turns positive, according to David Becker
Rates are priced for 6 increases at 25 basis points per meeting in 2022 while Covid is still ongoing. Also, the 214,000 jobless claims for the week ending March 12 came in better than the average estimate of 220,000 for the week ended. The total was the lowest since January 1st. The four-week moving average also fell to 223,000.
Market analyst David Becker notes that resistance for gold is seen near the 10-day moving average at $1,983, with additional resistance near the March highs at $2,070. The analyst states that support is seen near the 50-day moving average at 1.873, reminding that short-term momentum has turned positive as the Rapid stochastic crossover creates a buy signal.
On the other hand, medium-term momentum turned negative as the MACD (moving average convergence divergence) index created a cross-sell signal. The analyst states that this scenario occurs when the MACD line (12-day moving average minus the 26-day moving average) crosses below the MACD signal line (9-day moving average of the MACD line).
Pablo Piovano: Gold could retest $1,900
CME Group’s latest data for gold futures markets noted that open interest contracted for the fourth consecutive session on Thursday, this time to just 931 contracts. Along the same lines, volume dropped for the second consecutive session, now around 51.3k contracts.
Market analyst Pablo Piovano states that the increase in gold prices on Thursday is an indication that in line with the decreasing open interest and volume, extra earnings are not preferred in the very near term. Against this, the precious metal could retest the recent support in the $1,900 region.
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