The Gold price is struggling once again today as traders are paying attention to the strength in the economic data. Today, we had the Chinese Factory activity data that confirmed that the recovery is much faster and healthier than the expectations.
The fact is that if the Chinese Factory orders are growing at a much healthier rate, it also means that the global economy is also on stable footing. This particular factor has made investors favour riskier assets today.
In addition to this, there is also an element of a stronger dollar pushing the gold price lower. Yesterday, we had the US consumer confidence data, and the number was simply stellar. This pushed the dollar index even higher, and as a result, we have more inflow of bearish bets on gold.
The most important event for the gold traders is President Joe Biden’s speech. Biden is determined to put the US economy on the right path, and it appears that he is willing to do whatever it takes.
It was not a long time ago when we saw 1.9 trillion dollars of stimulus hitting the US economy. And today, Biden is expected to talk about another stimulus package that could be in the ballpark of 3 trillion dollars.
Of course, this stimulus package is different than the previous ones as this is not about stimulus cheques, but it is more geared towards infrastructure and the economy. But the fact is that we have a mammoth amount of fiscal help consistently coming from the government, then the US economy is highly likely to see a stellar growth number in the coming month.
Thus, it is highly likely that we will see gold prices remain vulnerable today.
Gold prices have failed to maintain their upward trend, and since the price made its all-time high. We have only one major trend, and that is a downtrend. Investors have been paying close attention to the 1,700 price level as major psychological support level, but yesterday the price broke this price level.
On the daily time frame, the gold price is trading below the 50, 100, and 200-day Simple Moving Averages (SMAs), and this confirms that bears are in full control of the price. However, because of yesterday’s excessive sell-off, the Relative Strength Index (RSI) is showing that the gold price is oversold. This means that either we may see a pause in the current sell-off, or the price may retrace some of its recent price moves before it begins to drop further again.
The near-term support level for the gold price is at 1660, and a break of this will open the door towards the next support level, which is at 1550. As for the resistance, the 1,700 price level remains as the first resistance, and then we are likely to see the price moving towards the 1,750 price mark.