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Mon, Apr 15, 2024

Gold is at the Resistance level
4 mins well spent

Gold Analysis

Gold hits the recent resistance zone now.

Let’s wait for the confirmation of the breakout.

Key points

  • The projections of a mild CPI rise keeps it at a magnetic zone
  • Down goes the Dollar, up goes the Gold as Inflation goes past projection
  • In India, the price started on a high note and continues to rise

Gold price has reached the recent resistance zone 1955 for the 3rd time. we are expecting a breakout at this resistance zone.

According to Motilal Oswal V.P. Amit Sajeja, if the Yields continue to be high, the Dollar will remain stronger thereby exerting undue pressure on the Gold. The consequence of this is that Gold will become expensive in other regions except for the US. Federal Reserve Bank conducted a survey that projected increased inflation if what has happened in the past was anything to go by. Inflation has been rising for several months owing to growing yields that boosted the USD.

Inflation rate rising faster

Going by what has happened, there is a very high possibility that the precious metal will not gain. However, chances are that it might pull back towards the end of the week, this was according to Stephen Innes, the Chief market expert with FSFA (Financial Services Firm Axi). Even though the Feds representatives have spoken of maintaining the Inflation margins down, there is a possibility that they could spring forth as the year progresses. This means we are yet to see a serious comeback from Gold. If inflation keeps on going up, it might impact positively on the stabilization of gold price or even a strong resistance from the metal.

consumer price index CPI us economy

However, there are mixed reactions with some pundits saying that the prices could stabilize or even rise if the CPI comes as a surprise. What this means is that since the price might have been based on a higher inflation projection the price could see an uptrend even if the inflation goes past the projected margin.

The metal seems to be moving back to its earlier trend of picking trade around the average value zone. It is here where many trades have been executed. It has been revolving around there for a while. What can we say, it seems as if there is a price magnet around that area. The Lower lows/highs have been broken, firming between 1673.3 -1759.4 per oz. Any break either way has the mood of the market as of now. There is a feeble pushback however, its sustainability is unknown. Support or push that is leveraging around the current trend is a good sign that the price could be sustained. 

Uptrend Market chart with gold train

The latest CPI points to a 0.2% increase from the previous margin in February. It has surpassed what was projected at around 0.5%. Initially gold was trading fairly, however, after the announcement, a bullish trend is taking shape. This is a good gesture to the gold price, there was a prediction that high inflation rates could work for the good of this precious yellow metal. The pressure that has been piled against gold will somehow start reducing. In return, this might see a pushback. As expected the rising of CPI has triggered a high inflation projection that brought some happy news to the gold traders. The USD loses as the EUR gains slightly. Not only that, Gold traders were a happy lot after GOLD gained $10 to sell at $1740. A continued rise in inflation could see gold continuing to gain more ground if the latest projection is anything to go by. This is complicated further by the continued restrictions and lockdowns. The amazing part is that even though the US government stopped the administration of the Johnson and Johnson vaccine over blood clot claims, it did not hinder the metal from gaining ground.

Gold bangles in the shop

However, things were different as the day began in India. The price rose to Rs 46,458 up from Rs 46,419 for 10gms. The demand made speculators create new positions. The positions contributed to hiked Gold Prices. The price is expected to gain more owing to the happenings in the US.

Gold prices keep moving up after a deep correction, we are expecting a breakout at the top level of this resistance zone.

However, the big swings are expected. 

Always trade Gold with proper risk and stop loss only after the full confirmation.

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