Technical Analysis

Gold Futures (GC), Key Levels and Trade Opportunities as Middle East Tensions Ease

The price of gold has experienced a significant drop after failing to break through the resistance level of $2,400. This decrease in price is primarily attributed to a reduction in demand for safe-haven assets, as tensions in the Middle East, particularly between Iran and Israel, have not escalated further.

US Treasury Yields on the Rise

The yield on 10-year US Treasury notes has risen to 4.66%, influenced by the expectation that the Federal Reserve may delay interest rate cuts compared to other central banks. Higher yields make non-yielding assets like gold less attractive for investment, as investors seek higher returns elsewhere.

Inflation and Economic Indicators to Watch

The upcoming release of the US core Personal Consumption Expenditure Price Index (PCE) for March is a critical event to monitor, as it is a major inflation measure watched closely by the Federal Reserve. The PCE data could influence the timing of any potential rate adjustments. Additionally, preliminary Q1 Gross Domestic Product (GDP) data is expected to show strong economic growth on Thursday, which could support the case for keeping interest rates higher to manage inflation.

US Dollar Stability and Its Impact on Gold

The US Dollar Index (DXY) is currently stable, but it plays a crucial role in influencing gold prices, as gold is priced in dollars. A stronger dollar typically pressures gold prices downward, as it makes gold more expensive for holders of other currencies.

Technical Analysis

Most important levels:

  1. Resistance: $2,418 (recent high)
  2. Support: $2,315 (20-day EMA), $2,268 (April 5 low), and $2,223 (March 21 high)

Trade opportunities

Short-term correction: As the price has retreated from the recent high of $2,418, a mean-reversion move towards the 20-day EMA at $2,315 is expected. This correction is likely to be temporary and not a bearish reversal. Traders can consider buying on dips near the 20-day EMA, with a stop-loss placed below the $2,268 support level.

Long-term bullish trend: The overall outlook for Gold remains strong as long as the RSI stays within the 60.00-80.00 range. If the price bounces off the 20-day EMA or the $2,268 support level, it could present a buying opportunity for traders looking to capitalize on the long-term bullish trend. The target for this trade would be the recent high of $2,418, with a stop-loss placed below the $2,223 support level.