Gold Rebounds A sell Everything Mode Pauses

Gold is on the rebound on Friday, paring some of the losses from the previous 2 session. The precious metal is down over 10% across the past fortnight.

Rather than bounding higher on safe haven flows, gold has been under pressure across the past 2 weeks. Intensifying coronavirus fears resulted in investors liquefying their gold positions to either

Cover margin
To rotate into US dollar amid sell everything mode and "cash is best" .

However, today amid a slight improvement in broad risk sentiment, thanks to a stimulus bonanza, the rush to cash has paused and investors are cautiously buying back into the market. Global action from central banks and government policy makers to cushion the economic hit from coronavirus has finally caught up with the market. Stocks are on the rise, oil and gold.

Dead cat bounce?

However, there is a good chance that this is a dead cat bounce as the rush for cash pauses, so buying into gold to hedge any weekend risk is not on this occasion a sensible strategy.

There will not be a quick bounce back here. In parts of Europe and US we are just at the start of what could be a long social distancing, isolation and possible lock down phase. The situation in US and Europe is expected to get worse before it gets better. There is a good chance that we haven't seen the end of the run to cash.

And if risk sentiment improves?

Even if risk appetite does increase, thanks to huge stimulus you don't stay in safe havens. The UK rolled out a £330 billion bailout package, with more to come this afternoon. US is debating a $1 trillion dollar rescue package. Stocks are moving higher. Should risk sentiment show a meaningful improvement, traders would usually look to riskier assets rather than gold.

Levels to Watch

Despite Gold trading up 2% so far today, the technical picture remains negative. A close above its 200 sma could tempt more bulls in.

Immediate resistance can be seen on 4 hour chart at $1516 (today's high) followed by strong resistance at $1555 (200 sma & high 17th March).

On the downside, support can be seen at $1455 (today's low) followed by $1451 (16th March low) before opening the doors to $1437 (low 5th Aug 2019).

Share: Analysis feed

CFD and forex trading are leveraged products and can result in losses that exceed your deposits. They may not be suitable for everyone. Ensure you fully understand the risks. From time to time, City Index Limited’s (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material. As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed