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Gold is constrained in a limited range

Gold is growing on Friday after a very volatile movement on Thursday. Investors are using the results of Jerome Powell's speech at the Jackson Hall symposium.

As part of his speech, Chairman Powell presented the Fed's new monetary policy strategy. The Central Bank abandons its long-standing practice of prescribing an increase in interest rates to keep inflation below 2%. Following Powell's speech, Dallas and St. Louis Federal Reserve Banks presidents Robert Kaplan and James Bullard stated that FRS would allow a moderate overshoot of the 2% target if inflationary pressures were weak.

 

The market was strongly influenced by the statements of the FRS representatives that the US economy will feel the impact of the COVID-19 pandemic for several years.

Gold initially faced pressure as long-term US Treasury yields soared to their highest level in months. The US dollar also strengthened locally. But later the dollar and the yield on Treasury bonds turned down again, creating favorable conditions for the recovery of the value of gold.

 

The pressure on the American currency and the yield on government bonds could have come from the data on the labor market. More than 1 million Americans have applied for unemployment benefits in a week.

 

The US Congress has yet to reach consensus on a new stimulus package. A telephone conversation on Thursday between US House Speaker Nancy Pelosi and White House chief of staff Mark Meadows ended in vain.

 

Today, Asian markets reacted very sharply to reports of the possible resignation of Japanese Prime Minister Shinzo Abe.

 

Uncertainty in financial markets remains very high. Geopolitical and economic instability is supporting strong demand for gold and other defensive assets.

 

Yesterday gold tested the resistance at 1971.00, after which it quickly returned to the range of 1914.00-1955.00. Today the initiative is on the side of buyers. We are waiting for the next retest of resistance at 1955.00 and a possible breakdown of this mark.

 

  • Resistance levels: 1955.00, 1971.00, 1993.00.

 

  • Support levels: 1914.00, 1875.00, 1850.00.

 

The main scenario - a breakdown of resistance at 1955.00 and an increase to 1971.00.

 

An alternative scenario - a consolidation in the range of 1914.00-1955.00.

 

The current fundamental outlook is neutral. We consider longs from the level of 1940.00.

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