Bottom line: Gold bearish structure remains intact until prices stay below $1703.00 levels. The counter trend rally might be complete around $1675 levels on April 06, 2020.
Fundamental Outlook:
The Yellow Metal had dropped sharply in March but the rally has been impressive since then. It has been primarily due to most Central Banks pumping liquidity globally. Furthermore, the Corona Pandemic has shown signs peaking in few European Countries leading to further stability in Gold. It remains to be seen how Gold reacts as it inches near resistance at $1703.00.
The weeks focus also continues to remain in the COVID-19 pandemic and the record Jobless claims over the last 2 weeks in the U.S. The total number of infected cased increased further in the U.S, as it tops the list at 367,629, with over 625 new cases added.
The Eurozone also awaits a decision to be taken over the Corona Bond this week.
Technical Analysis:
Gold has rallied towards $1675 levels, hitting the fibonacci 0.88% retracement of the earlier decline between $1703 and $1450 levels respectively. We can expect a bearish reaction as the yellow metal inches closer to $1703.00 resistance.
Looking at the wave structure, the earlier decline was an impulse marked as Wave 1. The subsequent rally towards $1675 levels has been corrective. Typically Wave 2 would never retrace Wave 1 completely, and Gold prices may not break $1703 levels, going further. If the above holds, we are close to witnessing a sharp decline towards $1300 levels.
Most traders might be willing to initiate fresh short positions around $1660/70 levels, with a protective stop above $1703.00 and projected targets below $1300 mark. Only a break above $1703 would nullify the bearish structure.
Overall, the yellow metal remains bearish until prices stay below $1703.00 resistance and looking at the risk reward ratio offered at this point in writing, it might be a safe trading strategy to sell on rallies.
Prepared by
Harsh Japee, Technical Analyst.
Gold Chart
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