Gold Analysis – Bearish Indicators in Place
Gold has remained silent even after multiple announcements by the Fed on rate hikes. Gold prices will be on the alert this week during the testimony of Fed President Jerome Powell.
XAUUSD closed the first week of 2022 with a loss of 1.76% from its December 2021 closing price at $ 1,830. Inflation hedge – Gold appears to have a weaker advantage over the strengthening US dollar. Gold investment volumes declined in the third quarter of 2021, while in the third quarter of 2020 the total gold linked to the investment was 495 t one year after that number fell to 235 t. Gold linked to the investment had dominant demand in the third quarter of 2020 and has been declining since then.
Despite an increase in gold purchases by global central banks in 2021, many CBs have separated from their purchases of precious metals to prevent deflation of their local currencies as the US dollar gained momentum at the end of 2021. Thus, Turkey had to sell 35.1 tons in 2021 to prevent the depreciation of the pound, in 2020, the Turkish BC bought 163.1 tons of gold. The largest gold purchases in 2021 according to World Gold Council data were made by Brazil 62.3 tonnes, Hungary 63 tonnes, India 73.8 tonnes, Japan 80.8 tonnes, Thailand 90 , 2 tons.
The biggest increase / decrease in BC in the third quarter of 2021 is as follows.
Based on this data, it is evident that these central banks are hedging against the rising US dollar index. Kazakhstan, Uzbekistan and Russia will be more vulnerable in recent days against the US dollar due to developments in Kazakhstan and these states will likely use their gold purchases to prevent their currencies from depreciating, following the Turkish CB.
First row from left to right – USD / INR, USD / KZT, USD / UZS
Second row from left to right – USD / BRL, USD / RUB, USD / TRY
While news of the rate hike in late 2020 and mid-2021 was characterized as a bullish signal for gold and bearish for the US dollar index, since mid-2021 markets have been relying more on the buyout by the FED of objectives, promises and forecasts. Although some forecasts are wavering, achieving one of the main targets is seen as bullish for the US dollar. Positive economic data during this week’s release and Mr. Powell’s positive outlook on the US economic recovery will ignite the DXY’s bullish momentum.
The XAUUSD daily chart projects a triangular pattern and signals the re-testing of the lower edge of the triangle, based on the pattern rule.
MACD and RSI are also signaling a continuation of the downtrend in XAUUSD through the end of this winter.
Moving averages on a daily XAUUSD chart also do not favor bulls in gold. MA200 and MA50 are both above the closing price of XAUUSD. Remarkably, the 200-day moving average is higher than the 50-day MA. This training in technical analysis is called “Cross of Death” and is always a bearish signal.
There is still dynamic support that may have kept gold from slipping below $ 1700, but the lack of momentum and pressure from the USD could force XAUUSD to break that support down to $ 1724 and $ 1680. below.