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Risk-On Sentiment Drives Gold Lower - Quick Technical Outlook! 


During Wednesday Asian trading session, the safe-haven-metal prices failed to extend its previous session gains and dropped to the 1,705.26 marks due to the broad-based U.S. dollar strength. Despite the intensifying tension between the United States and China, gold prices flashing red. At this moment, the yellow-metal prices are currently trading at 1,708.81 and consolidate in the narrow range between the 1,705.38 - 1,716.12. However, the losses were bolstered by a broad-based U.S. dollar strength, which tends to undermine demand for the dollar-denominated commodity.

The yellow-metal succeeded in recovering some positive traction on Tuesday and reversed the previous day's modest downtick, albeit remained well within a three-day-old trading range.

The reasons for the U.S. dollar strength could be attributed to the worsening US-China relations. President Donald Trump signaled to impose penalties like a tariff on China in reaction to China's planned national security law for Hong Kong strengthened the broad-based U.S. dollar and contributed to the losses in yellow-metal. While the U.S. Dollar Index that tracks the greenback against a basket of other currencies reporting gains 0.26% to 99.168 by 12:06 AM ET (5:06 AM GMT), with investors turning to the safe-haven asset. Whereas, the stocks which normally move in the opposite direction to gold, were also down on Wednesday.

It's worth mentioning that the reason for the gold yesterday's drop could be attributed to the major economic restart calls while also appreciating the global efforts to find a cure to the coronavirus (COVID-19).

Moving on, investors will pay attention to U.S. Federal Reserve Chair Jerome Powell's comments during an online discussion scheduled for Friday. The headlines concerning U.S. relations with China and Russia could gain market attention due to a light calendar in Asia.

Daily Support and Resistance

    • S1 1665.16
    • S2 1691.83
    • S3 1701.64

Pivot Point 1718.5

    • R1 1728.32
    • R2 1745.17
    • R3 1771.84

Gold is trying to break beneath a critical support zone of 1,693 level that can be seen on the 4-hour chart above. Closing of 4-hour candles below 1,707 level, which worked as support during the Asian session, has driven further selling in the gold to lead its price lower towards 1,693. For now, the precious metal is likely to find support around 1,693 areas, and violation of this level can extend selling until the next support level of 1,683. Good luck!

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