Gold price benefitted from the dollar’s weakness in yesterday’s trading following more easing measures from the Federal Reserve. As my colleague Eno Eteng reported yesterday, the central bank pledged to purchase the necessary amount of government bonds to smoothen market functions.
Consequently, this was interpreted by market participants as a sign that the Fed will be printing unlimited amounts of money, putting them back into the economy through government bonds and mortgage-backed securities. This weakened the dollar because more money supply means that the value of the paper currency is diluted. Meanwhile, gold price attracted demand because of its safe haven status. This means that investors acknowledge the inherent value of gold unlike paper currencies.
Technicals on the daily chart of XAUUSD suggest that the precious metal still has room to trade higher. By connecting the lows of December 9, December 13, February 5, and March 2, we can see that gold price may face trend line resistance around 1,607.80. This price also coincides with the 61.8% Fib level when you draw the Fibonacci retracement tool from the high of March 9 to the low of March 16. If there are enough buyers in the market, we could see XAUUSD trade higher to this price.
On the other hand, if XAUUSD closes at its current levels around 1,562.90, it will have closed as a shooting star. This candlestick is considered as a bearish confirmation signal and could mean that gold price will soon slide to its recent lows at 1,469.75.