- Gold bulls try their luck but upside attempts appear limited amid cautious optimism.
- DXY eases with yields while weaker oil prices, China’s covid support buoys sentiment.
- Gold price breaches key daily support, Ukraine updates could revive the dollar’s demand.
Gold price kicked off a new week on a bearish note on Monday, as it tumbled nearly $35 after failing to resist above the $1,950 psychological level. The demand for the US dollar-dominated amid multiple factors, weighing negatively on the USD-denominated gold. Risk-aversion hit investors hard after mainland China's CSI300 share index plunged almost 10% as the 26-million population of Shanghai went into a 2-stage lockdown on rising coronavirus cases. Therefore, the greenback benefited from the safe-haven flows at gold’s expense. Chinese covid lockdown triggered a fresh sell-off in oil prices, reducing gold’s appeal as a hedge against inflation. Moreover, the relentless surge in the US Treasury yields, amid expectations of a 50-bps May Fed rate hike, deepened the pain in the non-yielding gold price. Another factor that could be linked to the turmoil in gold price was the hopes for progress in peace talks, as Russia and Ukraine negotiators were set to meet in Turkey for a one-on-one meeting.
Gold price is making a minor recovery attempt this Tuesday, having found support just above the $1,920 barrier. Shanghai city rolled out economic measures to support the local firms, as lockdown bites. This helped improve the market mood, as the US dollar struggles amid a retreat in the yields across the curve. However, investors remain edgy amid slim chances of a meeting between the Russian and the Ukrainian leaders while cease-fire talks will likely continue. The developments surrounding the two warring nations will likely lead the market sentiment, especially after the Kremlin called US President Biden's apparent call for regime change in Moscow "a cause for concern". Meanwhile, Ukraine’s President Volodymyr Zelensky made his offer for future neutrality in return for peace.
In the day ahead, gold traders will also watch out for the Fedspeak and the US second-tier economic releases for fresh trading opportunities.
Gold: Daily chart
As observed on the daily chart, gold price breached $1,937, the 23.6% Fibonacci Retracement (Fibo) level of the recent descent from 2022 highs of $2,070 to the March 16 lows of $1,895.
The sell-off extended, thereafter, as the price gave a daily closing below the rising trendline support, then at $1,928.
In Tuesday’s trading so far, the bright metal is testing the abovementioned trendline support now resistance at $1,931 on its road to recovery.
If the latter is scaled on a sustained basis, then the 23.6% Fibo level will come into play once again.
Further up, the mildly bullish 21-Daily Moving Average (DMA) at $1,953 will be retested. The next significant resistance awaits at $1,962, the 38.2% Fibo level of the same descent.
Gold buyers will then target the previous week’s high at $1,966, above which the $1,970 round level will challenge the bearish commitments.
On the downside, if the previous day’s low of $1,917 gets cracked convincingly, then floors will open floors towards the previous week’s low of $1,910.
The line in the sand for gold bulls is seen at $1,895, where the March 16 low and ascending 50-DMA align.
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