Gold remains on track to test the August low of $1863
· Gold (XAU/USD) plummeted 3% and reached the lowest levels in six-week at $1882 on Monday. The yellow metal treads water above $1900 in Tuesday’s trading so far, as the dollar bulls take a breather, digesting the release of the Fed Chair Jerome Powell’s prepared remarks ahead of his three-day Congressional testimony, FXStreet’s Dhwani Mehta briefs.
· “Although a brief bounce cannot be ruled out before the yellow metal resumes the sell-off. The 14-day Relative Strength Index (RSI), currently at 43.85, has turned flat, backing the case for a temporary pullback, especially given Monday’s slump. Therefore, the immediate upside barrier is aligned at the pattern support now resistance at $1930. A break above which the confluence of the 21 and 50-DMAs around $1940/41 will limit the recovery attempts.”
· “To the downside, the $1900 level could be once again challenged by the bears. The next downside target at $1882 (Monday’s low) could be put at risk. A failure to defend the latter could expose the August low at $1863.”
· “Gold is now more sensitive to the U.S. dollar rather than any other factors,” said Margaret Yang, a strategist with DailyFx, which covers currency, commodity and index.
· But offering support to gold were concerns about fresh lockdowns in Europe, which has reported a surge in virus cases. Doubts about a swift economic recovery also kept investors away from riskier assets.
· “In the near-term, gold may struggle to hold gains above $1,900 ... In the event that it breaks down $1,900 it may open more room to the downside towards maybe $1,870,” she added.
· Investors are now eyeing speeches by Fed committee members, including Chairman Jerome Powell, who will appear before Congressional committees this week.
· “Central banks would continue to have major concerns about economic growth,” Avtar Sandu, a senior commodities manager at Phillip Futures, said in a note.
· “Ultra-low yields and negative real interest rates will remain as they are now for much longer, this should provide support for the gold prices in the longer term.”
· Gold: Hard To Be Excited With Dollar Index Above 93
Gold’s Range Wide At $1,900-$1,970
A range of $1,900-$1,970 would be good for gold now, with aspirations for $2,000 and above best left for later.
“A move above Friday’s high of $1,960 would be an indication of something moving, but for now, it is very difficult to get excited about gold,” Richard Perry of Hantec Markets said in another blog post on FX Street.
Sunil Kumar Dixit has a similar view. “If the metal fails around 1927-1935, the correction may extend lower to 100 Day SMA $1,863 and further next 38.2% Fibonacci level $1,836,” says the independent gold chartist.
· Fed Chief’s Testimony Could Help Gold Or The Dollar
Gold could muster a way forward if Federal Reserve Chairman Jay Powell’s three-day testimony to Congress, which began on Tuesday, helps the yellow metal catch a bid.
In his opening remarks to Congress, released early to the media, Powell said US economic indicators such as employment, housing and fixed investments for business have improved markedly since the outbreak of the coronavirus pandemic in March.
A couple of months back, such a remark from Powell might have been enough to power gold into $2,000 highs.
· Extended Wall Street Weakness Could Hurt Gold
But these days, it’s the dollar that’s likely to catch a bid—illogically as it may be given the yawning US fiscal deficit and its debasing effect on the greenback. Talk of deflation, as much as inflation, has also made investors wary of bulking up in gold.
· Gold production to drop 1.7% due to COVID-19 disruptions - GlobalData
Worldwide global production of gold is forecast to contract by 1.7% due to COVID-19 disruptions, GlobalData forecast today.
The analytics company said that almost all of the top producers are expected to witness a decline in the production levels during 2020 owing to the pandemic and consequent lockdowns in several key markets, such as South Africa.
Reference: CNBC, Kitco, Investing, FXStreet
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