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Market News Gold price fails to hold $1,700 (With Trading Strategy)

Gold price fails to hold $1,700 (With Trading Strategy)

Gold faces headwinds from strong China factory data. Gold price remains under strong selling pressure below $1,700.

LEO
2021-03-31
865

gold.jpeg


Gold prices inched lower on Wednesday as data showing a faster-than-expected growth in China's factory activity weighed on the metal's safe- haven appeal, while a surge in U.S. Treasury yields added further pressure.


The spot gold fell 0.02% to $1684.33 per ounce by 15:50(GMT+8) on Tuesday.


China's factory activity expanded at a faster-than-expected pace in March, official data showed, as factories that had closed for the Lunar New Year holiday resumed production to meet improving demand.  


The U.S. 10-year Treasury yield rose as far as 1.776% on Tuesday, its highest since Jan. 22.  


Higher returns on bonds increase the opportunity cost of holding non-yielding bullion.


U.S. consumer confidence surged in March to its highest level since the start of the COVID-19 pandemic, supporting views that economic growth will accelerate in the coming months. 


Federal Reserve policymakers are optimistic about the U.S. economic outlook as more Americans are vaccinated and government aid gets to households and businesses, and they are not going to stand in its way. 


The International Monetary Fund will raise its forecast for global economic growth in 2021 and 2022 after last year's 3.5% contraction, IMF Managing Director Kristalina Georgieva said on Tuesday. 


More vaccines and more spending


Accelerating the move in yields this week is the market's anticipation of more stimulus. President Joe Biden is scheduled to speak in Pittsburgh on Wednesday to outline his economic plan, including infrastructure spending and tax hikes. The overall package is expected to exceed $3 trillion.


"The treasury markets are cautious ahead of President Biden's spending plans," said Rhona O'Connell, head of market analysis for EMEA and Asia regions at StoneX. "The markets had expected asset quarter-end asset-rotation to benefit bonds, but thus far the reverse has developed."


On top of that, there is Biden's ambitious 90-90 vaccine plan, which sees 90% of U.S. adults as eligible for vaccines by Apr. 19 and 90% of the population living within five miles of a vaccination site.


"This is boosting risk appetite and fuelling hopes that the world's largest economy can recover more swiftly than expected," said SP Angel analyst John Meyer.


Gold tumbles


Gold was unable to hold its key support level of $1,700 an ounce on Tuesday. Year-to-date, gold is down 12.5%. This would mark the first quarterly decline since 2018. At the time of writing, June Comex gold futures were trading at $1,680.30, down 1.86% on the day.


However, it is not just about the yields. The macroeconomic environment that weighs on gold is quite intertwined.


As Treasuries sell off, they push investors towards the safety of the U.S. dollar, which puts additional pressure on gold. The U.S. dollar index reached a four-month high this week on the positive developments in the U.S. 


"It is becoming clear that the mighty dollar is the culprit behind gold's decline. The encouraging developments on the vaccine front in the U.S. have fuelled hopes for a faster U.S. economic recovery, consequently boosting appetite for the greenback. Should the dollar extend gains in the week ahead, this is likely to drag gold prices lower," said FXTM senior research analyst Lukman Otunuga.


The pressure from rising yields is not going away anytime soon, according to TD Securities, which is projecting for the 10-year yields to reach 2% by the year-end.


The only hope for gold is to start diverging from its inverse relationship with yields, said RJO Futures senior commodities broker Daniel Pavilonis.


"Maybe we could start to snap free of the correlation that if rates go up, gold has to go down. If we can deviate away from that with the announcement of Biden's new infrastructure package, it will be good for gold," he said. "When we see inflation, it is time to buy gold."


Trading Strategy (source: Trading Central)

Pivot: 1678.00


Our preference: long positions above 1678.00 with targets at 1692.00 & 1700.00 in extension.


Alternative scenario: below 1678.00 look for further downside with 1672.00 & 1664.00 as targets.


Comment: the RSI calls for a rebound.


Supports and resistances:

1707.00

1700.00

1692.00

1684.70 Last

1678.00

1672.00

1664.00

Guideline for Trading Central strategy 


Trend chart reading guideline


1. First look at the time period in the upper left corner of the chart: ·30MIN and 1H chart shows the trading suggestions for intraday ·Daily chart shows the market trend analysis in next 2-3 days


2. The blue horizontal line on the chart marks the pivot: pivot indicates the reversal of the market. When the price is above the pivot, it indicates an upward trend, when the price is below the pivot , it indicates a downward trend. When the price breaks through the pivot, the trend is reversed.


3. The red and blue thin curves in the Candlestick chart chart are technical indicators: Red line is MA20+Bollinger bands, Blue line is MA50. under the Candlestick chart chart are also the technical indicators: Blue line is RSI, Red line is 9MA;


4. The green horizontal line is the resistance level for a price increase, and is also the profit target for long orders; the red horizontal line is the support level for a price decrease, and is also the profit target for short orders.


How to use TC strategy?


1.[Pivot] is the reversal line of the market trend. When the price up the pivot line which means in Bullish, you can open a long position or Buy. on the contrary, when the price under pivot line which means in bearish. You ‘d better make short positions or Sell. 


2. [our preference] is the main trading suggestion for your reference. You can exit your trading refer to this target or close positions before it.


3. [Alternative scenario] is the plan B for your reference. 


4. [Comment] is the technical analysis of market trends and technical support for trading strategies. 


5. [Supports and resistance] Supports are levels where the price tend to find support as it falls.


Resistances are levels where the price tend to find resistance as it rises. So, exit before the trend reverse.

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