Weekly Technical and Fundamental Analysis of Gold – April 14

Last week, global gold gathered momentum and rose by approximately 0.60%. If you switch your time frame to weekly, you will notice that this is the fourth consecutive week of gold’s ascent.

A very important point is that in the past week, global gold once again successfully reached new highs and proudly touched the $2400 level. In fact, last Wednesday when gold fell to $2320, many thought that the global ounce was intending to make a deep correction!

However, on the last working day of the week, global gold once again managed to create a new masterpiece and pushed itself up to the important level of $2400. Interestingly, gold did this regardless of the strengthening of the US dollar.

Now, in the upcoming week and in the absence of strong economic data from the United States, the market catalyst for gold will be one, economic reports from China, and another, geopolitical tensions in the Middle East.

Events of last week in the gold market:

The global gold ounce opened at $2330 last Monday, went a few pips down, and then started to rise to around $2354. In fact, gold opened positively in the first two days of the previous week and closed positively as well, having a very good overall situation.

Since the whole market was waiting for the very important Consumer Price Index (CPI) report of the United States, gold trading volume remained within a small range.

Then came Wednesday; the same day when the entire market was waiting for the US CPI report.

On Wednesday, the US Bureau of Labor Statistics reported that inflation in March in the United States, measured annually by the Consumer Price Index (CPI), increased from 3.2% in February to 3.5% in March.

It is worth mentioning that the market was expecting a figure of 3.4%, which was higher than market predictions.

Moreover, the annual core CPI, which excludes food and energy, also increased to 3.8% for the same period, matching the February increase.

Finally, it’s not bad to know that both inflation and its monthly core increased by 0.4% monthly. Interestingly, the market was expecting a figure of 0.3%, which was higher than both of them.

The yield on 10-year US Treasury bonds reached its highest level since mid-November, above 4.5%, after the inflation report was released. The US dollar index also rose above the 105 price level, the highest in the past five months, after reading the inflation report.

This important factor caused a corrective decline in gold.

Global gold, which opened at $2352 on Wednesday, dropped to around $2320 and finally ended its working day at $2333.

It’s interesting to note that according to the famous interest rate predictor CME Group, the probability of the Federal Reserve keeping its rates unchanged in June increased from 40% to 80% before the release of the inflation report!

This important factor caused global gold to drop by nearly 1% on Wednesday and register its second red day in the past two working weeks.

Although the dollar maintained its strength on Thursday, escalating geopolitical tensions in the Middle East helped gold resume its upward movements.

In fact, Iran blamed Israel for attacking its consulate in Syria earlier this month and revived fears of deepening conflicts in the Middle East, promising retaliatory action.

This exact important and vital factor has led to the recent rise in gold and the conquering of new peaks for this precious metal.

the same day when the market awaited the important meeting of the European Central Bank (ECB) in April.

After its April meeting on Thursday to determine interest rates, the European Central Bank kept its key rates within the current range (4.5%). It’s worth noting that the market had predicted this beforehand and this news failed to shake financial markets.

If you remember, the Federal Reserve of America, which had predicted 3 interest rate cuts for this year in its dot plot chart, seems to postpone this due to its strong economic reports such as job news and inflation released last Wednesday.

However, this does not apply to the European Central Bank, and whispers are heard that the ECB intends to reduce its rates in June. This news has been published by Reuters, citing three reliable sources!

One of the factors that has led to the recent increase in gold’s sharpness is this rumor of a reduction in ECB interest rates and capital outflows from the euro towards global gold.

It is interesting to note that the gold-euro currency pair (XAUEUR) has also succeeded in reaching its highest historical level, flying close to $2286, and has recorded a 9% increase in April so far.

Moreover, this currency pair also had a 10% growth last month.

In the end, as traders in the market sought a safe haven on their last working day, they once again rushed towards investing in gold. This important factor has led global gold to once again show a new record and fly to the important level of $2400.

Apart from risk aversion and the advantage of gold as a safe asset, purchases of global ounces by international banks have also caused the price of this precious metal to rise in the market as a whole.

The World Gold Council stated in its monthly report released earlier this week: The fundamental factors underlying the current growth of gold include increasing geopolitical risks, steady central bank purchases worldwide, and strong demand for jewelry, bars, and coins.

Events for the next week in the Forex and gold markets

After two consecutive weeks of very strong reports for the market and from the United States, the only important report expected to be announced next week for the United States is the March retail sales data, which is scheduled to be released on Monday.

Economic analysts have predicted that US retail sales in March will increase from a 0.6% growth in February to 0.3%.

If for any reason the announced figure is less than 0.3%, the US dollar will react negatively to this news and will start to decline.

Conversely, if for any reason US retail sales for March are higher than 0.3%, the dollar will strengthen again and continue its upward movement.

Then on Tuesday and during the Asian trading session, the Chinese are expected to release their Gross Domestic Product (GDP) for the first quarter of 2024.

Traders closely follow this report as China is the world’s second-largest economic power and news of its GDP will impact many assets.

Economic analysts and financial market experts have predicted that China’s Gross Domestic Product will increase from a 5.2% growth in the last quarter of 2023 to 5% in the first quarter of 2024.

Keep in mind that the disappointing release of China’s Gross Domestic Product, the world’s largest consumer of gold, can create concerns about the outlook for demand for this precious yellow metal and restrict the rise of XAU/USD in the short term.

Conversely, if China’s GDP for the first quarter of 2024 is better and stronger than market expectations, gold traders will be more optimistic about China’s economic situation, leading to further upward movement in gold prices.

Furthermore, recent geopolitical tensions between the Islamic Republic and Israel play a significant role in the pricing trend of global gold, and traders will closely monitor this news. As a general rule, if tensions between Israel and Iran decrease for any reason, gold will continue its downward correction.

On the other hand, if tensions between the Islamic Republic and Israel increase for any reason, gold will continue its upward trend.

Additionally, XAU/USD will likely continue to find support in a risk-averse environment, even if the dollar continues to outperform its competitors (a strong reason for the dollar’s strengthening is the delay in starting interest rate cuts due to strong data from the U.S.).

Weekly Technical Analysis of Gold

The price floor and ceiling for gold last week were $2302 and $2431. If you open the daily gold chart now and plot an RSI indicator, you will see that the indicator’s peak is moving downwards within the overbought zone and showing a value of 72.

This means that control is still in the hands of market bulls, but we should be prepared for a correction from its new historical peak at any moment.

Moreover, if you draw an upward channel on the daily timeframe, you will notice that global gold has broken out above its channel ceiling this time and is moving significantly higher relative to its channel ceiling.

Key support levels in the analysis of global gold ounces

If gold is expected to decline, the first significant support level will be the important area of $2330. If gold penetrates below this area, the next key price level is $2320. If market bears push gold lower, the next important levels will be $2300 and $2290.

Key resistance levels in the analysis of global gold ounces

If gold rises, the first important resistance level will be $2350. If gold successfully surpasses this area, the next key level is $2360. If market bulls manage to push the price of gold higher, the next resistance levels will be $2370 and $2380.

Disclaimer: This article is for informational purposes only and should not be considered financial advice. Please consult with a qualified financial advisor before making any investment decisions.

Happy trading
may the pips be ever in your favor!