Gold Defends $4,000 Level as Strong Dollar Caps Gains

Gold Weekly Technical Analysis

The gold market has fallen during most of the week, but we do see a little bit of support and interest near the crucial $4,000 level for the third week in a row. Ultimately, this is a market that I think continues to see a lot of back-and-forth trading as we try to determine whether or not the trend will save itself here, or if we break down.

If we break down below the $3,900 level, it’s very likely that we go looking to the $3,500 level, an area that I think would be very important based on previous resistance and an ascending triangle that formed there. To the upside, if we can break above the 50-week EMA right around the $4,250 level, then it could be a sensible place to assume that there’s a recovery in the gold market.

US Dollar and Higher Bond Yields Create Structural Obstacles

The biggest problem that gold has, of course, is interest rates in the United States and the stronger US dollar. As long as the US dollar remains somewhat strong against the backdrop of other currencies around the world and in the backdrop of higher-than-usual rates, it’s difficult to imagine that gold takes off.

I think that a lot of what’s going on is the noise around the Middle East has people concerned about inflation, and that inflation has people driving rates higher, which means that larger money can get a return with a bond instead of going into non-yielding assets like gold. It’s just basic portfolio construction, I think, that is a big problem for gold at the moment.

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