- Gold price is on a rebound to $1,774.78 after experiencing its worst week since the onset of the coronavirus pandemic.
- According to the fear & greed index, fear drives the markets as safe-haven demand signals extreme fear.
- US GDP, Fed officials’ statements, and US Treasury yields will impact gold price in the new week.
The gold price had experienced its worst week since the beginning of the coronavirus pandemic in March 2020. In the past week, it has dropped by about 6.13%. The last time it recorded a plunge of that magnitude was during the week ending on 13th March 2020, when the prices fell by 11.67%. To recoup those losses, it has started the week on a rebound by trading at $1,774.78.
It’s not over yet
Despite the recorded decline, the bullish cycle for gold price is not over yet. According to the fear & greed index, which tracks the emotions driving financial markets, investors fear the prevailing conditions. In the previous session, the index was at 41 on the fear side of the spectrum. It has since dropped further to 30. This is in comparison to a week ago when the index was at a neutral of 54.
As one of the tracked indicators, the demand for safe-haven assets signals the investors’ extreme fear of the current market conditions. With the subsequent risk-off sentiment, the demand for precious metals as a safe haven and hedge against inflation is bound to rise. This may equate to a surge in the gold price in the ensuing sessions.
Upcoming events
In the coming week, gold prices will be reacting to Fed Chair Jerome Powell’s testimony as well as speeches from the bank’s officials, including Mary Daly, William Dudley, Michelle Bowman, and Raphael Bostic.
The existing and new home sales data scheduled for Tuesday and Wednesday, respectively, will also be influential. This is founded on the inverse correlation between the US dollar and precious metal. As such, higher-than-expected numbers can boost the greenback while exerting pressure on the gold price.
The focus will shift to the initial jobless claims and US GDP data expected on Thursday in the second half of the week. Both sets of data will shed more light on the status of the US economic recovery as investors continue to digest the Fed’s shift in position.
Besides, the US Treasury yields will continue to shape the trajectory of gold prices. Last week, the benchmark 10-year US bond yields rose from 1.44 to 1.59 in the first half of the week. However, after the Fed’s hawkish surprise, they dropped to end the week at 1.43.
In the new week, it has extended its prior losses at its current 1.39. Notably, that is its lowest level since the beginning of March. Treasury yields tend to have a direct correlation with the value of the greenback. As such, lower US bond yields are a bearish catalyst for the dollar, boosting gold prices.
Gold price technical outlook
The past week has been the worst for the gold price since the onset of the coronavirus pandemic, having dropped by about 6.13%. It closed Friday’s session down by 0.52% at 1,764.23 after starting the week at 1,879.35.
Notably, it has begun the new week on a rebound by trading at 1,774.78 early on Monday. However, it is still trading below the 25 and 50-day Exponential Moving Averages on a four-hour chart.
In the new week, I expect the gold price to rebound to the psychological level of 1,800. If more buyers enter the market, it may push the prices higher to 1,843.08, which is a prior resistance level.
On the flip side, it may trade sideways along with its current support level of 1,760.37. Further weakness will push the precious metal to April’s support level at 1,732.40.
