Gold Technical Analysis: Stable, Despite USD Strength – 22 March 2022
The price of gold remained in a state of stability, heading to the upside, despite more hawkish hints by US Central Bank Governor Jerome Powell towards the future of raising US interest rates during 2022. These confirmations provided more impetus for the gains of the US dollar, and despite that, the price of an ounce of gold settled around the level of 1938 dollars at the time of writing the analysis. At the start of this week’s trading, the price of gold remained flat – after its biggest weekly drop since June – as investors weighed monetary tightening in the US against the impact of the Russia-Ukraine war. Gold prices fell 3.4% last week as the Federal Reserve raised US interest rates for the first time since 2018.
The Fed raised interest rates for the first time since 2018 last week and indicated, using its dot chart, policy makers’ expectations that the index could rise to between 2.5% and 3% over the next year. For his part, former US Treasury Secretary Lawrence Summers said the US Federal Reserve would need to raise borrowing costs higher than officials currently expect – to 4% to 5% – if it is to struggle with inflation once again under control. Higher interest rates affect non-interest bearing gold.
China’s one-year key loan rate, the actual benchmark lending rate, will also be closely watched for signs of China’s central bank easing after top leaders pledged measures to boost Asia’s largest economy. Besides, investors are also considering conflicting messages regarding the war in Ukraine. Turkey said Moscow and Kiev were close to reaching an agreement on key points, while a senior Ukrainian aide said Russia had switched to “more destructive artillery”.
Meanwhile, Ukraine has rejected a Russian demand that the besieged southern port city of Mariupol surrender. Gold – a haven asset – has been helped by that struggle.
According to the technical analysis of gold: The general trend of the gold market is still bullish despite the recent sell-offs. As I mentioned before, the Russian-Ukrainian war will remain an important factor for the continuation of gold gains despite the global central banks’ tendency to tighten their policy strongly this year. The continuation of the Russian war supports the idea of buying gold from every descending level. The closest important support levels for gold are currently 1920 and 1880 dollars, and from the last level and less than it, it is better to buy gold at that stage.
The market’s attention will return to the historical psychological peak of 2000 dollars an ounce again if the price of gold moves towards the resistance levels of 1955 and 1980 dollars again. The price of gold today will be affected by the level of the US dollar and the extent to which investors take risks or not, as well as the reaction from the developments of the Russian war.