Gold has proven its dependable influence in times of market uncertainty and volatility concerning fundamentals and technicals that traders and investors have been facing. The yellow metal has produced spectacular movements which have kept all market participants alert to the current and previous market environment.
In the last quarter of 2021 participants saw gold’s erratic movements being primarily guided by inflationary and interest rate expectations. After CPI reached its highest level in around 13 years in November gold reached prices of around 1877 to the dollar, only to give up those gains after the FED Chair announced interest rate hikes to curb inflationary pressures. Initially, the rate hikes were expected to commence in March of this year, but after FED minutes were released, the markets digested the announcement made on Wednesday that rate hikes would happen sooner than what was previously stated. This abrupt and unexpected information resulted in Gold prices dropping around 1.2% back to late December levels.
As mentioned above, interest rate hikes are a tool that central banks use to combat inflation, but this doesn’t mean that inflation is not a concern anymore. Market participants are less risk-averse with the current economic climate which is not boding well for gold, but inflationary pressures remain a reality.
Gold has been persuaded more by fundamentals as opposed to technicals recently. Regardless of that fact, technical analysis remains an important aspect in any analysis of most instruments. Looking at the longer-term view (Daily timeframe) we can still see gold is respecting levels previously reported on with trendlines, Fibonacci, and support levels. With longer-term analysis, it may not change from week to week as gold has reacted to these levels, but patience is required for the end result of that reaction.
As you can see on our chart, Gold is moving within two very strong trendline levels – both to the upper and lower section of the trend – after moving upward from the support level of around $1752 there have been a few false breaks within this channel, but that is nothing surprising for the likes of gold. Traders are awaiting further price structure to be revealed as a breakout of either one of these lines is significant for the longer-term direction.
**Disclaimer: This cannot to be construed as advice, it has been compiled purely as a guideline to responsible trading. Trade responsibly as your capital is at risk**