Gold Tests Support At $1930 As Strong Pullback Continues

Key Insights

• Demand for safe-haven assets declines amid signs of progress in Russia – Ukraine negotiations.
• Traders continue to take profits after the recent strong rally.
• A successful test of the support at the 20 EMA will open the way to the test of the support at $1915.

Gold Remains Under Strong Pressure

Gold is trying to settle below the support level at $1940 amid hopes for material progress in Russia – Ukraine negotiations.

WTI oil, which is also sensitive to geopolitical news, has recently declined below the $100 level and is trying to settle below $97.

The current pullback is strong as gold declined from $2070 to $1930 in just five trading sessions. The main drivers for this pullback include profit taking after the major rally, hopes for progress in Russia – Ukraine negotiations and fears about sales of Russian gold in the open market.

At this point, it looks that the Bank of Russia will not choose to sell its gold in the open market as these transactions are easily traced and may lead to more sanctions.

However, the market fears that the Bank of Russia will be forced to sell gold anyway as its foreign currency reserves have been blocked by sanctions, and this fear serves as a bearish catalyst for gold.

Technical Analysis

Gold is currently testing the support level at the 20 EMA at $1940. In case gold manages to settle below the 20 EMA, it will move towards the support at $1915. RSI remains in the moderate territory, and there is plenty of room to gain additional downside momentum in case the right catalysts emerge.

A move below the support at $1915 will push gold towards the next support level at $1900. If gold declines below this level, it will head towards the support at the 50 EMA near $1890.

On the upside, a move above the 20 EMA will push gold towards the resistance level at $1950. If gold manages to settle above this level, it will head towards the resistance at $1975. A successful test of the resistance at $1975 will push gold towards the resistance at $1950.

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