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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 67% of retail investor accounts lose money when trading CFDs with this provider.
You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Gold begins to form support again as Coronavirus fears grow

Trading outlook:
Support has formed on gold and the recent profit-taking has settled down. We are near term neutral whilst a trading-range has formed in the past 48 hours. However, we retain a positive medium-term bias, using weakness as a chance to buy for the next breakout.

 

Fundamentals/Newsflow

We still see a strong negative correlation between the US 10 year yield and gold (we show the move in the chart below with the yield inverted). The 10 year yield plunging below 1.300% today should help to sustain support for gold.

Newsflow on COVID-19 is worsening, with the case in California being regarded as a “community spread” with the source unknown. Safe haven flow remains dominant and this should continue to underpin gold.

 

Support
  • $1636 – intraday low, 26th February
  • $1625 – 26th February low
  • $1611 – 8th January high
Resistance 
  • $1655 – 26th February high
  • $1660 – 25th February high
  • $1688 – 24th February high

 

Technical Analysis

The gold buyers may have lost the momentum of their bull run, but we continue to expect weakness to be seen as an opportunity. The retracement has become rather choppy in the past 48 hours, but there is a basis of support around the 23.6% Fibonacci level (of $1445/$1688) around $1631. To yesterday’s low, the unwind has been $63 from the high (becoming comparable to the $75 unwind in January). It seems as though there is still an appetite to buy gold, judging by the overnight rebound once more, which has supported the market at $1625. There is still plenty of room for the unwinding move to continue though, with the key breakout at $1611 now a basis of support, and the support of a 10 week uptrend at $1585 today. We remain positive on gold on a medium-term basis and see near term weakness as a chance to buy. The hourly chart shows a little more of a range play has formed in the past couple of days, with support $1625/$1628 and resistance around $1658/$1662. Whilst this range is in place, we are now neutral but are looking for a breakout to signal renewed buying pressure.

 

Richard Perry

Richard Perry

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