Strong Gold Decline Factor – Analysis and Forecast – April 28, 2024
Weekly Gold Technical and Fundamental Analysis – April 28
Global gold ounces fell by more than 2%. The week ends April 26th. In fact, this is the first week that gold has begun its own correction after five straight weeks of gains.
If we look at gold on a weekly time frame and plot the RSI indicator, we can see that the highs of the RSI indicator are currently declining and are still in overbought territory.
It is worth noting that at the start of the working day and last Monday, gold was under severe selling pressure and recorded its highest one-day decline of 2024.
Global ounces were able to claw back some of their losses in the second half of last week, but ended the week in negative territory.
Now all markets are waiting for the Fed’s May meeting and other important meetings. U.S. Nonfarm payroll (NFP) This report will be released next week.
Events in the gold market last week:
As the foreign exchange trading day began last week, there was severe selling pressure from the downturn in the global gold and silver markets. This decline has been so severe that gold has set a record for its largest single-day decline in 2024 (gold opened at $2392 and fell to $2324, down about $70).
From a fundamental perspective, the main reason for this decline was the easing of tensions between Israel and the Islamic Republic of Iran in the Middle East. In the past few weeks, Iran has received hundreds of drones and missiles from Israel, and has retaliated by launching several drones into Iranian skies in a show of revenge.
Due to these important factors, global gold received great attention as a safe asset and surged to a historic high of $2,431.
Now that there is relative calm in the Middle East, gold has finally started to correct itself and is down about 2.7% in 2024, its biggest one-day decline.
The decline continued on Tuesday, with global gold falling to around $2,290, its lowest level since April 8.
Then, after a weak PMI report and selling pressure on the U.S. dollar index on Tuesday, global gold also rose (above $2,300) to end the business day uneventfully.
According to a recent report by S&P Global Ratings, the U.S. composite index Purchasing Managers’ Index (PMI) It decreased from 52.1 in March to 50.9 in April.
The report indicates that growth momentum in U.S. business activity and the private sector is slowing.
As you know, the PMI report includes various components and subcategories such as the inflation gauge component, unfortunately this component also declined and the US dollar index started to decline.
Meanwhile, Chris Williamson, chief economist at S&P Global Ratings, said:
“Our findings show that PMI, weaker demand and a cooling labor market led to lower price growth for goods and services sold in April, leading to downward price pressure.”
The USD showed resilience against its rivals on Wednesday after the U.S. Census Bureau reported durable goods orders rose 2.6% in March to $238.4 billion. Gold, on the other hand, tried to rally further but ultimately failed to make much progress.
And then Thursday came. It’s a day when the entire market awaits an important report on the US’s first quarter gross domestic product (GDP).
US Secretariat economic analysis (BEA) reported Thursday that U.S. gross domestic product (GDP) increased at an annual rate of 1.6% in the first quarter of 2024 (early estimates).
It is worth noting that this figure follows a very healthy 3.4% in the fourth quarter of 2023 and was below the forecast of 2.5%.
The US dollar index also fell in response to the GDP report, putting pressure on the US and pushing global gold higher again.
However, the Gross Domestic Product (GDP) report also showed that the Producer Price Index, known as a factor in reducing GDP, rose from 1.7% to 3.1%, so the extent of the increase in gold prices was limited. This means that inflation has a greater impact on GDP growth.
Friday finally came. A day when the entire market waited for an important report Personal Consumption Expenditures (PCE) in America.
According to the latest report from the US Bureau of Economic Analysis, annual inflation in the United States, as measured by the PCE index, increased by 2.7%. It’s worth noting that the market was expecting 2.6%, and the February figure was 2.8%.
Core annual PCE excluding food and energy also increased to 2.8%. This figure is exactly the same as the figure released in February and is better than market expectations of 2.6%.
These important factors caused the US dollar index to fall to around 105.40 before returning back above the 106 level, blocking further gains for gold.
Next week’s events in forex and gold markets
Keep in mind that next week is the most important week for the overall market and for gold traders and other financial assets as there is an important event from the Federal Reserve and the release of the sensitive US non-farm payrolls report.
Federal Reserve governors are scheduled to meet in May on Wednesday to decide on the latest bank rate.
However, it is important to note that economic analysts and markets expect the Fed to keep interest rates within the current 5.25% to 5.5% range.
According to recent economic data and major reports on US inflation and GDP, as well as popular CME Group tools, there is over a 90% chance that the Fed will keep interest rates within their current range.
Plus, as you know, when the Federal Reserve announces its latest interest rate changes, we’ll also talk about the state of the economy.
That’s highly unlikely. federal reserve bank In this section, we will announce new and unexpected things that could shake up the market.
However, at the press conference following this meeting, Federal Reserve Chairman Jerome Powell is likely to be asked whether there is still a possibility of an interest rate cut in June.
If Powell doesn’t close the door on a rate cut in June, the initial reaction could push U.S. Treasury yields down significantly and strengthen gold.
After the Fed’s March meeting, Chairman Powell noted that the high inflation numbers in January and February may have been due to seasonal factors.
Market participants are expected to pay close attention to Powell’s views on the inflation outlook.
If Chairman Powell takes a worrisome stance on recent inflation developments, the US dollar could remain resilient against rivals and limit gold’s upward trend.
Ultimately, if Powell downplays the importance of the first quarter gross domestic product (GDP) numbers, investors may interpret that as a hawkish signal that could pose a serious challenge to the gold rally.
Finally, remember that on Friday the Bureau of Labor Statistics is scheduled to release its April nonfarm payrolls report.
A significant decline in non-farm employment growth to around 150,000 could trigger an immediate market reaction to selling dollars.
Even if the NFP report doesn’t diverge much from expectations of a June rate cut, it could still have a negative impact on the U.S. dollar if it leaves investors speculating about a rate cut starting in September.
It’s worth noting that the popular CME Group tool currently indicates a 40% chance that the Fed will not adjust interest rates in September.
Weekly technical analysis of gold:
to technical analysis Last week, the lower and upper limits of gold price were 2291 and 2392 respectively. If we now open the daily gold chart and configure the RSI indicator, we will see that the highs of the indicator have moved upwards and display a value of 58 (indicating that RSI is out of the overbought zone).
This means the bulls are still in control and gold’s daily trend remains bullish.
Moreover, if we plot a rising channel on the daily time frame, we can see that global gold is trading slightly above the rising channel.
Key support levels in global ounce analysis:
If gold falls, the first important support level would be around $2,330. If gold moves out of this area, the next important price level is $2320. If gold falls due to market weakness, additional key support levels would be $2310 and $2300.
Key resistance levels in global ounce gold analysis:
If gold moves higher, the first important resistance level would be $2340. A successful surpass of this area would lead to the next major level at $2350. If the market rally pushes gold higher, subsequent resistance levels would be $2,360 and $2,370.
disclaimer: This article is for informational purposes only and should not be considered financial advice. Please consult a qualified financial advisor before making any investment decisions.
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