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Gold bulls keep their sight on $1,786 amid Taiwan tensions

Gold price eases but upside remains favored amid escalating US-China tensions. The expected visit of US’ Pelosi to Taipei rattles markets amid China warnings. Gold bulls remain on track to test the critical resistance area at $1,786.

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Technical Overview

The Technical Confluence Detector shows that the gold price is looking to find fresh upside traction, as it flirts with the $1,771 support area. That level is the convergence of the Fibonacci 23.6% one-day and SMA5 four-hour.

Defending the latter could fuel a bounce back towards the previous day’s high of $1,775. The next significant resistance is aligned at the pivot point one-day R1 at $1,779.

Bulls need to crack the confluence of the pivot point one-week R1 and pivot point one-day R2 at $1,786 to unleash a sustained move towards the $1,800 mark.

On the flip side, if sellers manage to find a strong foothold below the abovementioned support, then bears will challenge a strong cushion around $1,768, where the previous week’s high, SMA10 four-hour and Fibonacci 38.2% one-day coincide.  

The Fibonacci 61.8% one-day at $1,765 will come to buyers’ rescue, below which the Fibonacci 61.8% one-month at $1,763 will be probed.

The next downside targets are placed at the previous day’s low of $1,758 and the all-important Fibonacci 23.6% one-week at $1,755.


Fundamental Overview

Gold price seems positioned for a renewed upswing, with all eyes set on the $1,786 barrier en route to the $1,800 mark. The buying interest in the yellow metal remains unabated, despite the latest rebound in the US dollar, as investors prefer holding gold as a store of value amid escalating US-China tensions over Taiwan. US House of Representatives Speaker Nancy Pelosi is due to arrive in Taiwan at 1420 GMT. Both China and Taiwan have strengthened their military resources, as she is visiting the self-ruled island claimed by Beijing. Intensifying geopolitical tensions have ramped up risk-off flows into traditional safe havens such as the bullion and the US government bonds, weighing negatively on the Treasury yields. The ongoing slump in the yields is likely to remain a drag on the dollar. Looking forward, the absence of top-tier US economic data will keep the market’s attention on the Taiwan tensions.

Also read: Gold Price Forecast: XAU/USD outshines amid panic, targets $1,794



SPECIAL WEEKLY FORECAST

Interested in weekly XAU/USD forecasts? Our experts make weekly updates forecasting the next possible moves of the gold-dollar pair. Here you can find the most recent forecast by our market experts:

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Gold bulls keep their sight on $1,786 amid Taiwan tensions

Gold bulls keep their sight on $1,786 amid Taiwan tensions

Gold price eases but upside remains favored amid escalating US-China tensions. The expected visit of US’ Pelosi to Taipei rattles markets amid China warnings. Gold bulls remain on track to test the critical resistance area at $1,786.

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XAU/USD YEARLY FORECAST

How could XAU/USD move this year? Our experts make a XAU/USD update forecasting the possible moves of the gold-dollar pair during the whole year. Don't miss our 2022 XAU/USD forecast!

2022 FORECAST FOR XAU/USD

In the XAU/USD Price Forecast 2022, our analyst expects gold outlook to remain bullish in 2022 as central banks keep committed to supporting recovery. Read more details about the forecast.

Overall, Fed’s policy outlook in the face of inflation and COVID will be the main market driver of 2022.

MOST INFLUENTIAL POLITICAL EVENTS IN 2022 FOR XAU/USD

Gold could be expected to continue to stay inversely correlated with the US Treasury bond yields in 2022. The Fed’s policy outlook will be the key factor determining yields’ direction. If the Fed stays in wait-and-see mode in the first half of 2022 and hikes the policy rate by 25 basis points as expected in June, the timing of the second rate hike will be critical for markets. Markets could start pricing one more 25 basis points hike before the end of 2022 and fuel a rally in yields. That would provide a boost to the dollar and weigh on XAU/USD.


Gold/Silver Ratio

This ratio normally goes well during risk aversion, while it falls off during times of risk-on. If this ratio is about to turn, or at key levels where it could turn, the trader looks to the Equity indices if the risk has indeed been on and if it is about to turn as well.

When the ratio is rising, it means gold is outperforming silver, and when the line is falling, the first term is doing worse, i.e., silver is doing better. In other words, when the ratio is high, the general consensus is that silver is favored. Conversely, a low ratio tends to favor gold and may be a signal it’s a good time to buy the yellow metal. Despite the gold-to-silver ratio fluctuating so wildly, another way of using it is to switch holdings between silver and gold when the ratio swings to historically determined "extremes."

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About Gold

XAU/USD, GOLD

In the Forex market, gold is a form of currency. The particularity of gold is that it can only be traded against United States dollars (USD). The internationally accepted code for gold is XAU. It is known to be a “safe-haven” asset, it is expected to increase its value in times of volatility and economic uncertainty.
The XAU/USD pair tells the trader how many US Dollar (the quote currency) are needed to purchase one Gold Ounce (the base currency). United States is the country that holds the biggest resources of gold in the world.

ORGANIZATIONS THAT INFLUENCE XAU/USD THE MOST

  • WGC (World Gold Council), the market development organisation for the gold industry whose aim is to stimulate and sustain demand for that commodity.
  • LBMA, London Bullion Market Association, whose members conduct trading in this wholesale over-the-counter market for the trading of gold and silver. It is loosely overseen by the Bank of England. Most of the members are major international banks or bullion dealers and refiners.
  • COMEX (Commodity Exchange Inc.), the primary market for trading metals. The COMEX merged with the New York Mercantile exchange (NYMEX) in 1994 and became the division responsible for metals trading.
  • Zurich Gold Pool founded in 1968 by the largest banks in Switzerland after the collapse of the London Gold Pool.
  • CGSE, the Chinese Gold & Silver Exchange Society (see above the importance of China in terms of gold reserve).

PEOPLE THAT INFLUENCE XAU/USD THE MOST

  • David Harquail, the World Gold Council’s Chairman
  • Steven Mnuchin, US Treasury Secretary
  • Xi Jinping, President of the People's Republic of China and General Secretary of the Communist Party of China

ECONOMIC DATA THAT INFLUENCE XAU/USD THE MOST

The main indicators that traders should watch to understand where gold is standing are:

  • Demand vs Supply for the commodity
  • Struggling markets or context of currency devaluation: gold is known to be a haven for investors in times of economic uncertainty or when any country sees its currency devaluing
  • Practical applications: technology invents, jewellery use, etc

ASSETS THAT INFLUENCE XAU/USD THE MOST

  • Currencies: USD and EUR. Other important group of influent pairs includes: EUR/USD, GBP/USD, USD/JPY, AUD/USD, USD/CHF, NZD/USD and USD/CAD.
  • Commodities: Silver, the other most important precious metal commodity together with Gold.
  • Bonds: Bund (the German word for "bond", a debt security issued by Germany's federal government) and T-Note (Treasury Note, a marketable U.S. government debt security)
  • Indices: Hui (AMEX Gold BUGS), XAU (Philadelphia Gold and Silver Sector Index) and GDM (NYSE Arca Gold Miners Index) The most important stock exchanges are the New York Mercantile Exchange (COMEX), the Chicago Board of Trade, the Euronext/LIFFE, the London Bullion Market, the Tokyo Commodity Exchange, the Bolsa der Mercadorias e Futuros and the Korea Futures Exchange.

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