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Gold holding above 1,440/450, but the risk of a downward break remains

March 25, 2020 20:00

Gold

Economic Events March 25

Source: Economic Events March 25, 2020 - Admiral Markets' Forex Calendar

The situation in Gold remains very tense, even though it is holding above 1,440/450 USD, which is a positive sign from a technical perspective.

While Gold, given the recent developments around the massive monetary stimulus from the Fed on March 15, stays bullish in the mid- to long-term (especially after the March 23 Fed announcement to go for "QE Infinity" making a run above 2,000 USD only a question of time), the short-term picture is bearish and selling pressure on the precious metal is likely to persist.

The reason for that is the US dollar. The Fed emergency statement on March 15 pointed to the re-installation of swap lines with global central banks.

To make long things short: this step clearly aims to make sure that global central banks have enough USD available, overcome the current USD shortage in global financial markets.

That said, we expect the demand for the greenback to stay high. The same should be expected in regards to the pressure on credit markets, forcing further liquidations, also in Gold, in our opinion.

If in addition to that, if the Durable Goods Orders come in better than expected, US yields could see another lift and a deeper corrective move back above 1% in 10-year US Treasuries could be seen.

Out of this, a short-term a drop below 1,440/450 USD would technically darken the picture, activating 1,250/260 USD as a first target.

Gold Daily chart

Source: Admiral Markets MT5 with MT5-SE Add-on Gold Daily chart (between December 21, 2018, to March 24, 2020). Accessed: March 24, 2020, at 22:00pm GMT - Please note: Past performance is not a reliable indicator of future results, or future performance.

In 2015, the value of Gold fell by 10.4%, in 2016, it increased by 8.1%, in 2017, it increased by 13.1%, in 2018, it fell by 1.6%, in 2019, it increased by 18.9%, meaning that after five years, it was up by 28%.

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