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Fundamentals

During Tuesday's (April 25th) Asian session, spot gold shocked upward, it once climbed above 2000 today, but just one touch and it is currently trading near $1994/oz. Besides, the overnight data showed contracted manufacturing activity in Texas in April, while the market expectation of the Fed to cut interest rates during the year heated up. Additionally, the market's concerns about the U.S. debt crisis rose, and the U.S. treasury bond yields, as well as the USDX, have fallen to a new low of more than a week, all provided support for gold prices. However, with the current significant market divergence, gold prices are still difficult to get out of the unilateral trend, so, it is better to treat it as shocking at highs.

In general: gold prices will be suppressed by the 2000 level before the landing of US/Europe interest rate hikes. Future gold prices could repeat the same situation as today and difficult to gain stable support or pressure level, that is, maintaining the oscillations. It is recommended to focus on the US first quarter GDP and March PCE data that will be announced today. Moreover, as the market expectation will be weaker, USD will enter a weaker trend as well, which may instead boost the gold price. Nonetheless, trade it appropriately without too many expectations, as the recent risk sentiments are low, and the banking system risks may persist. For example, the First Republic Bank claimed a decrease of more than 100 billion USD in its first quarter deposit, and the bank Stocks plunged more than 20%, while the US stock index futures are also weakening, dragging down Asian equities. Meanwhile, China's stock market has seen five consecutive losses, giving back all its April gains, with the Shanghai Stock Exchange Index back to levels seen earlier this year, all of which could provide some safe-haven support for the USD.

The trading range today should be 1974-2003.

Technical Analysis

Daily chart: regarding MACD, the death cross signal continues at highs with the bears dominating slightly, but the trend is not smooth since the 5-day/10-day/20-day SMAs are too close. At present, gold prices will oscillate downwards before breaking through the 10-day SMA (2002). The initial support will be near the low of April 17th (1981), or 1980, and the support of last Friday's low was near 1969. If the support is lost, the short-term bearish signal will be strengthened. Further support will be near the high of February 2nd (1960) and the lower support of March 27th is near 1944.

The gold price has been staying above 1980 since it fell from highs last week, suggesting the support for the buying-the-dips below is strong. Be aware that gold may recover the gain, and if it stands still above 2000, the psychological level, the short-term bearish signals will be strengthened. Further resistance will be near last week's high (2015), then the high on April 5th will be near 2032. If gold aggressively breaks through this resistance, it will be more possible that gold prices shall appreciate and break above the resistance near the historical high in 2075, with a new high created.  

Trading Recommendations

Trading direction: Short

Entry price: 2005

Target price: 1975

Stop loss: 2033

Support: 1981.000/1969.000

Resistance: 2015.000/2032.000