Why Are Gold Prices Struggling While Equities And Bond Yields Are Tumbling?

During Draghi’s tenure, he continuously pleaded for fiscal stimulus after it became clear that the unconventional monetary policy measures the central bank had implemented weren’t providing the desired effect of bringing inflation up to target levels on a sustained basis.

The big difference this time around with Lagarde is that the Coronavirus presents a larger threat, to which governments may respond to.

Technical Analysis

(Click on image to enlarge)

Gold Daily Chart

Gold Daily Chart

Gold prices have been trending lower and are testing the 20-day moving average at the time of writing.

The ECB meeting stands to increase the already volatile price swings seen over the past few days.

A rising trend channel, best seen on a 4-hour chart, has been encompassing price action since the middle of December. Support is seen at the lower bound of the trend channel, currently around $1611.

The same level reflects a spike high from early January. As well, the 200 moving average on a 4-hour chart falls near the horizontal level to create an even greater confluence of support.

Gold bulls will want to see the yellow metal hold above this support in the week ahead.

To the upside, the February spike high of $1689 is considered a major hurdle. It will likely take a break above it to confirm that the uptrend remains intact.

While it is too soon to start looking at monthly charts, keep in mind that XAU/USD posted an exhaustion candle in February. In this context, gold prices are at great risk if they fall into negative territory for March.

In other words, a decline below the March monthly open of $1585, while still a fair distance away, would offer a strong bearish signal.

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Gary Anderson 3 months ago Contributor's comment

Gold seems to act as a hedge against inflation, but not against deflationary pressures.

Backyard Hiker 3 months ago Member's comment

I would think that in days of #COVID19, people would be flocking to #gold.

Gary Anderson 3 months ago Contributor's comment

Maybe they will but we could be in a deflationary period which makes the dollar soar.