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Technical and fundamental analysis for Gold – June 2022

Published by Karl Martin Karus in category Uncategorized on 02.06.2022
Gold price (XAU-SEK)
20902,40 SEK/oz
  
- 102,10 SEK
Silver price (XAG-SEK)
232,55 SEK/oz
  
- 4,27 SEK

Fundamental Analysis

Gold price pushes to $1850 as the U.S. dollar weakens

After reaching a 20-year high on May 13th, the U.S. dollar index has dropped more than 2%. Gold prices, however, are up roughly 4% after rising off support below $1,800 an ounce.

The gold market has recaptured another major psychological threshold, with prices pushing back over $1.850 an ounce. The precious metal is gaining new positive momentum, according to experts, as the U.S. dollar continues to face selling pressure.

Further weakness in the equity market and scare of recession

Some analysts see room for the U.S. dollar and gold to rally together, especially as equity markets remain volatile.

Many analysts see further weakness ahead as corporate earnings face inflationary headwinds and rising recession fears.

“Equity market conditions can still worsen,” said Phillip Streible, Chief Market Strategist at Blue Line Futures. “There are signs that economic conditions in the U.S. are starting to deteriorate. That will drive safe-haven demand for gold and the dollar.”

Why is the gold price not making new highs despite raging inflation?

Gold prices are not moving up even as inflation is raging globally. Traditionally, gold is considered to be the best hedge against inflation. However, gold prices seem to be moving in a tight range in the current scenario, even though inflation is making waves globally.

In the U.S., inflation is close to 8.5%, almost at a 40-year high. In Sweden, inflation is close to 6.5%.

Interest rates are keeping the gold price in check. In the U.S., interest rates have started to increase, and there is a high probability that the FED will continue to rise interest rates by 0.25-0.75 basis points in the next meetings. In a rising interest rate scenario, gold is not a preferred investment.

Central banks continue to value gold’s utility

Despite a number of significant sales, global central bank gold demand remained brisk as net holdings increased by 83.8 tons in the first quarter of 2022.

  • Egypt was the biggest buyer of gold in Q1, adding 44 tons to its reserves in February.
  • Last quarter, Turkey was another big buyer, adding 37 tons of gold to its holdings. Turkey owns over 430 tons of gold, accounting for 28% of its reserve assets.
  • India added another six tons to its holdings in Q1. Since resuming buying in late 2017, the Reserve Bank of India has purchased over 200 tons of gold.

 

Technical indicator analysis

Trendlines / Support & Resistance

*Red lines are downtrend. The heavy red line is the long-term trendline.
*
Green lines are uptrend. The heavy green line is a long-term trendline.
*
Blue lines are short term support & resistance lines

(Picture 1. Trendlines & Support/Resistance)
You can check more interactive graphs from our Tradingview account.

  • In the last month’s Technical and Fundamental analysis for gold, we predicted: “250MA is considered a vital support/resistance area. In the current case, a powerful support area. If the gold price breaks through the 250MA support area, we can expect the price to touch the 1760 USD area.
  • We predicted that if the price breaks through 250MA, which is considered to be a strong support/resistance, the price might fall as low as 1760 before correction. The gold price touched a short-term support area of 1790 USD and spiked up from there.
  • The gold price must break through the 1850-1863 USD resistance area and close above to move further to the next resitnace area, around 1920 USD.
  • There is a firm support area between 1763-1793 USD area.
  • The yearly trendline also confirms the previous point.

The Garterly pattern, Moving Averages, and RSI


(Picture 2. – Garterly pattern, moving averages and RSI)


(Picture 3. RSI)

  • In the last month’s analysis, we saw a butterfly pattern. In reality, a month later, we see that the pattern was not yet fully formed, and it is a Bat pattern.
  • This kind of Bat pattern indicates a bullish movement upward.
  • In Picture 2, the graph shows that the price broke the 250MA line, indicating a strong bearish movement.
  • In picture 2, we see that the price quickly broke above the 250MA line again, indicating bullish movements.
  • There is a high potential that this very-short term bearish indication was a “fake indication” or, in trading terms, a “fakeout.”
  • In picture 3, When comparing the RSI indicator tool with the price graph, we see that the price graph tunnel is much steeper than the RSI indicator graph. This might indicate a bullish reversal.

In conclusion, there are no sure price indications nor a fundamental indication of super-strong price movements. The gold price can spike up when inflation affects the broader economy deeper, and the equity market falls even further.


Disclaimer: This article is for informational purposes only and is not intended as an investment analysis or recommendation to sell or buy commodities. Tavex is not responsible for any decisions made based on this information. Investing is associated with opportunities and risks, and the market value of commodities can both increase and decrease. Past or future yields on the commodities and financial ratios shown above do not represent a promise or an indication of future earnings

Gold price (XAU-SEK)
20902,40 SEK/oz
  
- 102,10 SEK
Silver price (XAG-SEK)
232,55 SEK/oz
  
- 4,27 SEK

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