With the risk aversion sentiment extension to the Asian session, the gold could penetrate its 23.6% Fibonacci retracement of its falling from 1920$ to 1180$ at 1354$, while the coming resisting level is expected to be at its previous formed peak on 29th of last October at 1360$ which can be followed by 1376$ before the psychological resistance at 1400$ before 1433$ which has been reached on previous worries about imposing US military action against the Syrian regime fueled the energy prices while going down again from here can be met by supporting level at 1318$ before 1306$ which can be followed by 1300$ psychological level while there are below it other standing supporting levels have been formed in its way to rebound to the current level at 1283$, 1231$, 1218$ before 1200$ psychological level which can be followed by its lowest level of last year at 1180$ which could hold supporting it again at the end of it to rebound from 1182$.
The gold could be well supported to reach the current levels following the worries about the tension developments in Ukraine despite its small economy, it can be the most threat to the European stability since the end of the cold war.
The ECB president Mario draghi has mentioned this same meaning last week when he talk about this crisis following the ECB’s decision to maintain its interest rate at 0.25% saying that EU is not closely tied to Ukraine, So, there is no strong contagion however the geopolitical risks from the Ukrainian situation could become substantial while the Ukrainian crisis impact on the Russian economy is actually sever but anyway it is early to talk about the long term impact of this crisis.
The markets could not totally get rid of their fears to load more risky assets because of this crisis which can persist again containing the market sentiment, after it could push up significantly in the beginning of last week the demand for bonds driving their yields down across the broad making the gold more attractive while it was gaining more demand from another by the rising of the commodities following the Russian intervening in Ukraine as a hedge against inflation beside its nature property as a safe haven.
From another side, it has become concluded now to most of the market participants that we are to have by God’s will, no pause of the Fed’s pace of incremental gradual QE tapering with the current harmonized agreement about it among its governors of the Fed who have not found in the bad whether impact on the labor market an excuse to stop tapering last meeting after December labor report has shown adding only 74k of jobs out of the farming sector while the next reports to it have shown improving by adding 129k in Feb and 175k in March consecutively.
So, the markets are mostly pricing now on ending of the Fed’s QE by the end of this year and starting of interest rate hiking in the first quarter of 2015 and the gold is also pricing currently on that, after its collapse last year by this way which has not been seen since 1981 on the worries about the beginning of Fed’s tapering which has started to be materialized to the markets by the end of it by a gradual way calmed the golden metal holders fear and encouraged other to buy it after its 28% collapse last year which has been staved off over its crucial supporting level at 1180$ per ounce.
Kind Regards
FX Market Strategist
Walid Salah El Din
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