Gold closed the second straight week in positive territory.XAU/USD could extend its rally toward $2,000 before turning overbought.
Safe-haven flows continue to dominate the markets amid inflation fears, geopolitical tensions.Gold managed to build on the previous week’s gains and registered its highest weekly close in a month above $1,970. The yellow metal ignored rising US Treasury bond yields for the majority of the week and continued to find demand as an inflation hedge and a safe haven.
What happened last week?
Gold started the week on a firm footing but erased a large portion of its daily gains after rising all the way to $1,970 on Monday.
The negative shift witnessed in risk sentiment on Tuesday provided a boost to the yellow metal. Fading hopes about Russia and Ukraine reaching a peace agreement, the ongoing coronavirus-related lockdowns in China and inflation fears forced investors to seek refuge. Reflecting the sour market mood, major equity indices in the US suffered heavy losses.
The US Bureau of Labor Statistics reported that inflation, as measured by the Consumer Price Index (CPI), surged to a new multi-decade high of 8.5% on a yearly basis in March from 7.9% in February. In the same period, the Core CPI edged higher to 6.5% from 6.4%.
Although XAU/USD dropped all the way to $1,960 during the dollar rally on Thursday, it almost fully retraced its daily decline and closed the week above $1,970. In the meantime, XAU/EUR rose nearly 2% on a weekly basis, helping the precious metal stay resilient in the face of surging US yields.
China will release the Gross Domestic Product (GDP) on Monday, which is expected to show an annualized growth of 4.4% in the first quarter. A weaker-than-forecast GDP print could cause markets to turn risk-averse at the start of the week and help gold find demand and vice versa.
Gold technical analysis
Gold closed the last five trading days above the 20-day SMA. Additionally, the Relative Strength Index (RSI) indicator on the daily chart holds near 60, confirming that bulls remain in control of gold’s price action.
On the upside, $1,990 (Fibonacci 23.6% retracement of the February – mid-March uptrend) aligns as first resistance. With a daily close above this level, XAU/USD could target $2,000 (psychological level) and $2,010 (March 10 high).
$1,950 (Fibonacci 38.2% retracement, 20-day SMA) forms a key support. In case this level turns into resistance, a deeper downward correction toward $1,930 (50-day SMA) and $1,920 (Fibonacci 50% retracement) could be witnessed.
EUR/USD recovers above 1.0800 following Thursday’s slump.After suffering heavy losses and plunging to its weakest level in two years at 1.0757 amid the European Central Bank’s inaction on Thursday, EUR/USD staged a modest recovery. With the market action turning subdued on Easter Friday, the pair is moving sideways slightly above 1.0800.
GBP/USD steadies above 1.3050, looks to post small weekly gains.GBP/USD is fluctuating in a tight range above 1.3050 on Friday and remains on track to close the week modestly higher. The sharp decline witnessed in EUR/GBP after ECB’s policy decisions suggest that the British pound captured some of the capital outflows out of the euro.
Gold aims $2,000 amid a solid rebound to near $1,960, yields surge.Gold witnessed a strong rebound in the late New York session from around $1,961.00 following a minor correction in the US dollar Index (DXY). Investors preferred the precious metal for parking their funds amid a long weekend due to the Easter holiday.
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