Gold Weekly Analysis: How Long Gold Will Fall April (25-29),2022
Last week's starting was pretty good for gold. In last week's weekly article, I mentioned that gold could test the $2000 price zone and can correct the downside from that level. It has been so.
Gold dropped nearly 2% last week after testing a robust $2000 resistance level. Last week, the $1950/1960 area was a strong support zone, and the market broke below the strong support level. So from the present rates, the $1960/1950 price zone will act as a strong resistance.
As the gold price has closed the market below $1950, gold has created the opportunity to drop a little more next week until $1917/1910.
As I said before, the biggest hurdle in raising the gold price in the current context is raising the Fed's bank rate and the US Treasury bond rate. If the Fed raises the bank rate, the Treasury bond price will naturally rise because the bond rate will never be lower than the bank rate.
If the bond rate is lower than the bank rate, neither you nor I will invest in the bond for a long time. Investors should invest in gold or bonds when the economy is under more pressure than usual. In times of crisis, investors consider these two sectors the safest.
What was the reason behind the gold drop last week?
I think gold can drop for two reasons.
1. Several Fed members hinted that they could raise the rate by 75 bp next month.
2. Gold is in correction mode due to an increase in the treasury bond rate.
The above two reasons are very logical. Last week, several Fed members hinted that the Fed might raise the rate to 75 bp next month. And Fed Chairman Powell said 50 bp could rise in the next few months, which is why this matter is dropping gold as a prize.
If gold is dropping, then gold will not drop too much. Because if the Fed can only tackle inflation by raising rates, the US will go into recession. Then the gold price will go up more than the current level.
What could happen next week?
If you look at the gold market closely, you will see that gold is going up 100/150 pips every time it tests the significant supports and then drops from the near-term resistance level to below the support level.
It is clear that gold has some buyers from every support level, and sellers dominate from every resistance level. You can't say that gold is fully bearish and keeps selling.
Next week, any bad dollar report will help gold test the upside and be nearly at the $1950 price zone. And from every strong support, one can stay in Gold Buy mode. And the strong support zone from the current rate is 1917/1910 dollars.
Similarly, there is a greater chance of staying in sell from every resistance level until the FED increases bank rates in the next month or goes back above the $1960 price zone again. Unless the Fed says, it is considering raising rates by 50 bp or less.
And if the Fed naturally raises rates below 50 bp, there is no doubt that the Treasury bond rate will drop and the gold price will rise again. Gold will rise from support and then drop from resistance again. But till the rate decision, sellers may dominate a bit.
As long as the gold price is below $1960, it is more likely to test the 1917/1910 level by lowering it. Since the Goods Order and Advanced GDP report will be released next week, there is ample opportunity to trade gold in this two news.
The chances of dropping the Advanced GDP report are very high. So, in this news, maybe gold can test $1950 again. But if good orders and advanced GDP both reports print positive gold may against test below $1900/1890 price zone again.
Technical View
$1920/1917 is identified as solid support from the present rates. Breaking below $1917 will open the door for $1910/1900. And finally, breaking below $1900, our final to the downside is the $1980 price zone.
On the other hand, as long as gold is below $1963/1965, it will be in a downtrend.
From the present rates, strong resistance is identified at $1950. Breaking above $1950 gold may test $1960.
GOld will go in buy mode after breaking above $1965, and the final target to the upside is $2000
Gold dropped nearly 2% last week after testing a robust $2000 resistance level. Last week, the $1950/1960 area was a strong support zone, and the market broke below the strong support level. So from the present rates, the $1960/1950 price zone will act as a strong resistance.
As the gold price has closed the market below $1950, gold has created the opportunity to drop a little more next week until $1917/1910.
As I said before, the biggest hurdle in raising the gold price in the current context is raising the Fed's bank rate and the US Treasury bond rate. If the Fed raises the bank rate, the Treasury bond price will naturally rise because the bond rate will never be lower than the bank rate.
If the bond rate is lower than the bank rate, neither you nor I will invest in the bond for a long time. Investors should invest in gold or bonds when the economy is under more pressure than usual. In times of crisis, investors consider these two sectors the safest.
What was the reason behind the gold drop last week?
I think gold can drop for two reasons.
1. Several Fed members hinted that they could raise the rate by 75 bp next month.
2. Gold is in correction mode due to an increase in the treasury bond rate.
The above two reasons are very logical. Last week, several Fed members hinted that the Fed might raise the rate to 75 bp next month. And Fed Chairman Powell said 50 bp could rise in the next few months, which is why this matter is dropping gold as a prize.
If gold is dropping, then gold will not drop too much. Because if the Fed can only tackle inflation by raising rates, the US will go into recession. Then the gold price will go up more than the current level.
What could happen next week?
If you look at the gold market closely, you will see that gold is going up 100/150 pips every time it tests the significant supports and then drops from the near-term resistance level to below the support level.
It is clear that gold has some buyers from every support level, and sellers dominate from every resistance level. You can't say that gold is fully bearish and keeps selling.
Next week, any bad dollar report will help gold test the upside and be nearly at the $1950 price zone. And from every strong support, one can stay in Gold Buy mode. And the strong support zone from the current rate is 1917/1910 dollars.
Similarly, there is a greater chance of staying in sell from every resistance level until the FED increases bank rates in the next month or goes back above the $1960 price zone again. Unless the Fed says, it is considering raising rates by 50 bp or less.
And if the Fed naturally raises rates below 50 bp, there is no doubt that the Treasury bond rate will drop and the gold price will rise again. Gold will rise from support and then drop from resistance again. But till the rate decision, sellers may dominate a bit.
As long as the gold price is below $1960, it is more likely to test the 1917/1910 level by lowering it. Since the Goods Order and Advanced GDP report will be released next week, there is ample opportunity to trade gold in this two news.
The chances of dropping the Advanced GDP report are very high. So, in this news, maybe gold can test $1950 again. But if good orders and advanced GDP both reports print positive gold may against test below $1900/1890 price zone again.
Technical View
$1920/1917 is identified as solid support from the present rates. Breaking below $1917 will open the door for $1910/1900. And finally, breaking below $1900, our final to the downside is the $1980 price zone.
On the other hand, as long as gold is below $1963/1965, it will be in a downtrend.
From the present rates, strong resistance is identified at $1950. Breaking above $1950 gold may test $1960.
GOld will go in buy mode after breaking above $1965, and the final target to the upside is $2000
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