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Sellers Pick up Steam
There was a quick flicker of excitement in Gold last quarter, and that ran parallel to the same fear that was injected into the global order as Russia invaded Ukraine. Gold prices broke out aggressively in late-February and early-March, right along with equities hitting fresh lows. The Nasdaq even temporarily took a trip into bear market territory.
But that fear left quickly in the middle of March as the Federal Reserve began lift-off by hiking rates by 25 basis points. And, from where we’re at, it seems as though this will be the start of something more than the end as the bank is expected to hike many more times this year, with some forecasts even looking for as many as eight more hikes in the final nine months of 2022 trade. Add in the expectation for Quantitative Tightening and this can make for a troubling backdrop for Gold into Q2, and the chart appears to reflect this well.
The Q1 breakout was unable to hold above the psychological $2k/oz level, with sellers picking up steam the week of the FOMC rate decision. That pushed prices right back to a key zone of support around the prior all-time-high from 2011, taken from around the 1900 handle.
Spot gold (XAU/USD) – Monthly chart – old resistance, current support
Chart created with TradingView
From the weekly chart below, we can see where gold prices spent much of the past two years including almost all of 2021 in a rather consistent range. Support was plotted just below 1700 while resistance held around 1900, which is what helps to make this zone so incredibly important.
Spot gold (XAU/USD) – Weekly chart
Chart created with TradingView
At this point we have support at prior resistance and for bulls, this can be used to substantiate continued upside. The question then becomes whether the trader is comfortable with Gold prices moving above and holding the $2k figure, which, at this point, there’s little evidence of. We’ve had but one weekly close – ever – with Gold above the $2,000/oz level.
And from the weekly chart, a recently confirmed evening star formation has opened the door for reversal potential. The pattern would be invalidated on a breach of the high which is very close to the prior all-time-high set in the Summer of 2020 at 2089.
The technical forecast for Gold will be set to bearish for Q2, 2022.
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