(Kitco News) – The gold market begins the week, holding critical support at $ 1,700 an ounce. Still, some market analysts warn investors that prices may fall in the short term as market sentiment changes.
Gold prices are trying to start the week on a positive note after experiencing the biggest loss in the past week since the start of March. In a relatively quiet Asian trading session, June gold futures last traded at $ 1,704.60 an ounce, up 0.22% on the day.
However, some analysts warn that investors should keep an eye on the downside as prices could test support around $ 1,650 an ounce in the short term.
Ole Hansen, head of commodity strategy at Saxo Bank, said in his weekly report that headlines about countries starting to ease their lock restrictions create some optimism in the financial markets that are weighing on prices. gold. He added that the global economy is increasingly expected to experience a V-shaped recovery after the worst slowdown in this century.
Hansen said the move could push gold prices to test short-term support at $ 1,655 and then at $ 1,634. However, he added that he was looking beyond the short-term downtrend.
“We view the recovery path as unfortunately anything but a V-shape. While the short-term technical outlook for gold has deteriorated, the long-term fundamentals have not,” he said. -he declares.
Marc Chandler, chief market strategist at Bannockburn Global Forex, noted in a report on Sunday that gold had consolidated in a wide range of $ 50 on each side of $ 1,700 an ounce.
“The MACD and the slow stochastic warn of the downside risk,” he said.
David Song, market strategist at DailyFX.com, said gold appears to be pausing as central banks begin to reign in their unprecedented emergency measures to support the failing economy.
Last week, the chairman of the Federal Reserve announced that the US central bank would do everything in its power to support the US economy. He noted that in the current emergency, “the deficits do not matter.” However, he added that he considered the current stance of monetary policy to be appropriate.
After the Federal Reserve’s monetary policy meeting, Christine Lagarde, President of the European Central Bank, said her board is ready to act to support the European economy. However, market participants were disappointed that the ECB did not take real preventive measures to increase their emergency purchasing programs.
Song said other central banks may signal a more cautious approach in the future, which could weigh on the precious metal.
“The recent decline in gold could accelerate in May, as the Reserve Bank of Australia (RBA) and the Bank of England (BoE) are expected to keep interest rates record, and the “A wait-and-see approach to monetary policy could dampen the appeal of bullion as governments in advanced economies unveil their plans to roll back lock laws,” he said in a report this weekend.
“That said, the environment of low interest rates, as well as the balance sheets of central banks, can continue to serve as a safety net for bullion, because market players are looking for an alternative to fiat currencies,” he said. he adds.
Song said he is also monitoring initial support at $ 1,655 and $ 1,634 an ounce.
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