Gold Pulls Back After Strong Rally

Key Insights

• Gold did not manage to settle above 2020 highs. 
• From the technical point of view, gold is overbought. 
• However, commodity markets stay strong, which is bullish for gold. 

Gold Moves Lower As Traders Take Some Profits Off The Table

Gold has recently moved below the $2050 level as global markets calmed down on hopes that the geopolitical situation will stabilize.

It remains to be seen whether such hopes are based on any tangible progress, but S&P 500 futures are already up by more than 1% in premarket trading.

The situation in commodity markets remains tense. Brent oil continues its attempts to settle above the $130 level, while LME was forced to suspend nickel trading due to “unprecedented movements in the nickel price”.

In this environment, the gold market may not be ready for a serious pullback as demand for the safe-haven gold may stay strong even if the equity markets start to rebound. Traders will also need to monitor commodity markets as their general dynamics may have a material impact on the dynamics of precious metals.

Technical Analysis

Gold tested the resistance at $2075 but failed to develop sufficient upside momentum and pulled back. RSI is in the extremely overbought territory, so gold has a decent chance to continue the pullback in case the right catalysts emerge.

The next support level for gold is located at $2020. If gold declines below this level, it will head towards the support at the psychologically important $2000 level. A move below this level will open the way to the test of the support at $1975.

On the upside, gold needs to settle above the recent highs near $2075 to continue its upside move and test the new highs near the $2100 level. The level of demand for safe-haven assets and the number of traders who are feeling the pain from the short squeeze will serve as the key catalysts that will determine whether gold gets to new highs in the upcoming trading sessions.

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