Gold price opened higher today after the Federal Reserve cut rates in an emergency meeting as the coronavirus pandemic continued to weigh on the US economy over the weekend. XAUUSD had a $40.54 weekend gap but the market quickly traded lower to fill it. Is gold still a safe haven asset?
In the past, situations which caused investor panic was typically bullish for gold price. This is because market participants acknowledge its intrinsic value. However, these past couple of weeks, gold price has not enjoyed any sustained rally in the markets. The rate cut over the weekend from the Federal Reserve through the FOMC (its interest rate-decision-making body) should have weakened the US dollar and pushed XAUUSD higher. Behind this logic is that the higher money supply dilutes the value of the currency.
An explanation that some analysts offer is that investors could be desperate for cash that they liquidate all their positions, even in gold.
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Gold Price Outlook
On the weekly time frame, we can see that gold price is testing a confluence of support around 1,547.00. This price coincides with the rising trend line when you connect the lows of May 19, 2019 and December 8, 2019. When using the Fibonacci retracement tool and drawing from the low of November 24 to the high of March 8, we can also see that it aligns with the 61.8% Fib level.
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The daily time frame also shows that XAUUSD is testing support at the 100 SMA. If there are enough buyers in the market, we may soon see gold price rally higher. In effect, it may regain its safe haven status as fears around the coronavirus pandemic drags on. Near-term resistance is at $1,587.00 where gold price found support on March 2.
On the other hand, a strong bearish close below last week’s low at $1,500.45 would effectively break the trend line support. It could mean a bigger sell-off for XAUUSD to $1,458.00 where it bottomed in November.More content
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