March 7, 2022 15:57:34
Gold, the ultimate safe haven asset, made a new cycle high at $2,002 earlier today. Investors sought the refuge of the precious metal, “the currency of last resort” as Goldman Sachs called it. The melt-up in energy and commodities was in full effect this morning after the US flagged a possible ban on Russian oil imports. This prompted more price spikes and resulting higher inflation expectations.
Europe, and potentially global growth, will suffer in the current environment forcing an economic slowdown. This will likely convince the Fed and other major central banks to take a more balanced approach to tightening monetary policy.
Real yields, that is interest rates on government bonds adjusted for inflation, have fallen sharply into negative territory once more. This is another reason why we are seeing gold buying step up. It is noteworthy that speculators have aggressively covered their short positions recently, further squeezing prices higher.
Bulls look to consolidate around $1974
Gold is overextended on several momentum indicators and timeframes, which means gains may slow from here. The daily RSI pushed above 75 and the weekly one is trading above 70. Prices have also surged sharply through the upper Keltner band. This is beyond the previous spike high in late February on the day Russia started its offensive at $1974.
The psychological $2000 level was always a level for buyers to aim for. Can gold bugs consolidate their recent gains? Upside targets include the 2020 swing high at $2075. Resistance just before here comes in at $2049.
Near-term support is the Fib level of the 2020 high and 2021 low at $1990, and then that spike top at $1974. A stronger base sits at the May 2021 high at $1916 and the next Fib level at $1923. A previous long-term high from 2011 also resides in this zone at $1921.
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