Gold retracement extended to $1,950 on better market mood, slowing safe-haven demand
NEW YORK (March 27) Gold price is trading right above $1,950 at the time of the writing, as the bright metal extends the retracement triggered after topping at the $2,000 round resistance in the latter stages of last week. XAU/USD bulls still are in the driver’s seat, as Gold keeps making higher highs and higher lows.
Gold pauses rally as market mood improves
After a couple of turbulent and hectic weeks of trading, the start of the last week of March seems a bit quieter. Banking fears have receded somewhat, as the Federal Deposit Insurance Corp (FDIC) announced over the weekend that First Citizens BancShares Inc bought all the loans and deposits from the bankrupt Silicon Valley Bank. Monday trading has started with a positive market mood, and capital inflows to safe-haven assets like Gold have calmed down.
This week's highlights in the economic calendar await on Friday, with Chinese PMIs and US Personal Consumption Expenditures (PCE) Price Index data being the two heaviest hitters. Gold price traders should closely monitor both releases. China is the biggest Gold market in the world and any developments in their economy are huge for precious metals demand. On the United States front, inflation figures remain at the top of the Federal Reserve officials’ minds, and US PCE numbers are their preferred inflation indicators.
Eren Sengezer, Senior Analyst at FXStreet, explains that Federal Open Market Committee (FOMC) member speeches should also be tracked by Gold traders, as the blackout period ended after last week’s meeting and any insights from the future monetary policy intentions of the Fed is huge to shape the expectations of the market:
Investors will pay close attention to comments from Fed officials now that the blackout period is over. Furthermore, Friday’s panic mode in markets showed that investors remain on the lookout for signs of stress in the banking sector. Hence, Gold price could benefit from another slide in global yields.
Gold price record highs in India slow down demand
The substantial rise seen in Gold price in recent weeks has been exacerbated in one of the biggest precious metal markets in the world, India. The weakening of the Indian Rupee is fueling a surge of Gold to an all-time high for Indian investors, reaching a record 60,455 rupees per 10 grams last week, according to Bloomberg.
These record high prices add to other domestic demand headwinds in the Asian giant, as people await "for the monsoons and the fourth quarter festivals like Divali to buy more Gold", according to PR Somasundaram, regional chief executive at the World Gold Council, also quoted by Bloomberg. Somasundaram adds, in the same interview, that the smuggling market is growing "due to a high import tax which puts the cash market at a discount."
Gold price develops bull flag pattern amidst bullish moving average cross
On the technical front, Gold price remains notably bullish despite the recent retracement. XAU/USD is nearing the 23.6% Fibonacci retracement level from the March 8-17 rally. According to Dhwani Mehta, Senior Analyst at FXStreet, Gold is developing a bull flag pattern and a bullish cross in its main moving averages, both clear signs of more upward trading action being developed:
Amidst the Bull Flag formation in play, Gold price continued to find support above the 23.6% Fibonacci Retracement (Fibo) level of the March advance, pegged at $1,963.
The 14-day Relative Strength Index (RSI) holds bullish while the 21-Daily Moving Average (DMA) pierced through the mildly firm 50 DMA for the upside on a daily closing basis, confirming a Bull Cross.
These favorable technical indicators continue to add credence to the bullish potential in the Gold price.
FXStreet
