Gold Is Stuck in a Range: Unlikely It Will End Quietly
FxPro Financial Services Ltd | May 25, 2023 09:46AM ET
Gold is finding support in the $1950 area on this week's declines but is not finding support from buyers on the rally above $1985.
Support for this trading range is provided by the area of the late January price peak, which has also acted as a pivot point more than once in this growth cycle, halting the rally. The ability to hold above this previously strong resistance for an extended period is an important signal for speculators.
The area from which gold was bought in the second half of April has become a local resistance.
On the side of gold buyers, there is a risk appetite on the back of expectations that the world's major central banks will end their rate hike cycles one by one, promising at least a pause to assess the situation. In addition, reports continue to emerge that emerging market central banks are continuing to diversify away from the dollar in favour of gold.
On the sell side, there is a broader set of factors. There is a pullback into the dollar now that the US regional banking crisis no longer scares large holders. As a result, gold and bitcoin have given up almost half of their gains from the March-May momentum.
Gold has also accumulated a certain amount of technical fatigue. Combined with the recent bearish momentum, gold has broken below its 50-day moving average, which has given the bulls an extra boost.
However, a dip below this curve is not necessarily a sign of a trend reversal. Gold traded below its 50-day for a month from February 10th but soon found support in the 50-week average, which was above $1800 then.
Gold's decline from the highs in early May removed the divergence between the RSI and the price action, which was a bearish signal. If gold does not come under further pressure in the coming days, this could be an important signal for a new round of gains that could take the price above $2100. However, this new all-time high has the potential to attract more bullish attention and become a prologue to further gains towards $2600.
Get The News You Want
A breakout of the current bearish range could pave the way for a strong move to $1810-1830, where the February lows and the 200-day average are located.
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.