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Fundamentals

Spot gold was shocked to the downside during the Asian session on Monday (April 24th) and is currently trading near $1980/oz. Last week, the Fed officials kept announcing to support further rate hikes before the blackout period, and the market reached a consensus that the Fed will raise interest rates by 25 bps. Moreover, PMI data are hitting nearly 11 new highs to further support the rate hike expectation. Meanwhile, market traders are aiming at short selling, leaving gold prices under pressure to the downside, but for now, the support above 1970 is still valid.

In general: US employment and consumption data both continue to weaken, reinforcing expectations of a US recession and indicating the ending of the tightening. However, there is still divergence in the current market, so it is better to focus on the early May interest rate meeting for another 25 bps. In addition, several Fed officials gave a hawkish speech to support May rate hikes, resulting in a rebound in USDX and treasury bond yields, suppressing the price trend of precious metals. Now, gold prices have fallen below $2000/oz, becoming the recent strong resistance. Nonetheless, it should be noted that by ending this round of the interest rate hike cycle, the market shall also bet the Fed will cut interest rates by the end of this year. Therefore, don't stay over bearish on gold, short selling will be appropriate in the near term, but maintains long as the main strategy.

The trading range will be 1969-2000 today.  

Technical Analysis

Daily chart: after the bearish Engulfing Pattern of the candlestick chart, gold depreciated with oscillations, and the death cross signals continued after the bearish divergence of the MACD. Moreover, the 5-day SMA turned downward and broke through the 10-day SMA, while the 10-day SMA also turned downward and suppressed gold. Then, gold lost the 20-day SMA, and further short-term topping signal is strengthened, suggesting a bearish trend. Furthermore, the initial support is near the low of last Wednesday at 1969 while the lower support of February 2nd is near 1960, and the strong support of the 38.2% Fibonacci retracement regarding the appreciation from 1805-2048, is near 1955. If the support is lost, further mid-term signals will be added.  

The initial resistance above is near the 5-day SMA (1993) while the resistance of the 10-day SMA is near 2002. If this position is recovered, short-term bearish signals will be weakened. Additionally, refer to 2015 and 2020 (the high of last Thursday) for further resistance.

Trading Recommendations

Trading direction: Long

Entry price: 1969

Target price: 2000

Stop loss: 1949

Support: 1969.000/1955.000

Resistance: 2000.000/2015.000