Gold, from making a low of $1800 in March 2023, is now above $2000! This is a $200 rally in just 2 months!
In this article, we review the various aspects affecting the Gold markets for the coming months.
Why is $2000 Important?
The precious metal has always retraced back down from the $2000 zone.
It all started back in August 2020 when Gold crossed the $2000 mark for the first time. However, the selling back then was way too strong and it completely flushed the buyers out of the market. This made the $2000 dollar mark a strong rejection zone for the buyers.
Then later in March 2022, Gold attempted to break the $2000 mark again however, it failed to do so again. The sellers clearly dominated that zone.
Now after almost 2 years, Gold is back above the $2000 mark. However, this time things look a bit different than usual.
From the above chart, we can clearly see that both the times when Gold was above $2000, the bears (like Sonny Corleone) without waiting pulled the precious metal back down.
However, this time, even though there is significant rejection in the higher zones, buyers are still stepping up the ladder and defending the precious metal.
Now, it has been almost 8 weeks since Gold has been hovering around the same levels.
In the above chart, we can clearly see that the Sellers failed to sell the trendline breakdown, and we can also see that now $2000 is acting as a support level. Before we come to a conclusion let us look at some of the factors affecting Gold.
Factors affecting Gold
Jeremy Powell recently expressed that,
the Fed “may not be far off, or possibly be even at,” the level where it may not have to raise rates further.
This statement has for sure affected the DXY a bit. This was evident after seeing the index fall from 102 to 101. However, the recent ECB statements about possible future rate hikes reflect a different picture contradicting the entire story, this has further increased confusion amongst speculative traders.
Nonetheless, the DXY took some support at the 101-dollar mark, which has acted as a significant support for DXY in the past.
Gold has now reached to a point wherein there are multiple possibilities, since it has been in a range for the past few trading sessions, the breakout or breakdown on either side is going to be strong.
Strong Shooting starts and Doji candles are signaling a trend exhausting on the higher end, however, 4H and 1H charts show that Gold is taking support at $2000 dollars.
Since, Gold has reversed from $2000 in the past two times. The odds are favoring the sellers. However, still, there is no clear technical sign of a reversal. As of now, no strong reversal chart pattern is formed on the longer time frames.
However, do note that Gold from 2nd May to 5th May has formed something which we call as the Left Shoulder on the 4H chart. However, since we don’t have enough data as of now we cannot confirm the Head and Shoulder possibility.
In conclusion, gold has made a strong rally in the past two months, but the $2000 zone remains a crucial resistance zone. The factors affecting gold are mixed, and traders need to keep an eye on both the Fed and ECB statements. The technical outlook is a bit mixed, with no clear sign of a reversal as of now. Traders need to keep an eye on the charts for any potential breakout or breakdown from the current range.
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Disclaimer:- The Author(Shivank Goswami) is an independent multi-asset class Investor and Trader, and not a registered Investment Analyst and Advisor. This article has been written for educational purposes only and should not be considered as an Investment or Trading Advice. Kindly contact your authorized stock advisor before taking any trades or investment decisions. Past performance is not a guarantee for a future return, nor is it an indication of any future performance. The information contained in this article has been compiled from a variety of official sources and is subject to change at any time without notice. Both the Author and GoldLane give no assurance or warranty that information on this site is current and accurate, and take no responsibility for matters arising from changed circumstances or other information or material which may affect the accuracy of the information on this article.