Gold Subdued Near $1,715, Remains Supported by Investors

2 min read
04 Mar, 21
Written by Clover4X
Article Highlights:
  • Gold hovers at a double bottom above $1,700
  • Investors watch for the approval of the US stimulus

Gold Remains Supported by Investors

Gold is trading near its recent lows on Thursday. This comes as market participants have been offering the yellow metal since the start of the year. Gold is in a downtrend that has started on January 6. Back then, the price reached a high of $1,959 and it has since gradually depreciated by 12% to the current market price. Investors do not seem to favor the safe haven offered in gold. They prefer riskier assets, underpinned by the much-anticipated relief package.

The $1.9tn stimulus bill is expected to go through Senate this week. President Joe Biden is hopeful he will get all 50 Senate Democrats to vote in favor. While Kamala Harris is expected to cast the tie-breaking vote in support of the fiscal stimulus.

Gold Remains Supported by Investors

In this light, investors have not been rotating much from their positions in equities. The focus remains on shares from real-economy sectors like hospitality, airlines, and banks. Gold has been put aside, resulting in this year’s drop to levels last seen in June 2020. Gold bugs, however, have reasons to be optimistic, both from a technical perspective and a fundamental view.

On the technical front, gold is now resting at a double bottom formation with the previous low of $1,704 reached on June 15 last year. Gold this week slipped to a low of $1,701 before it was supported by the bull camp. The MACD and the RSI, technical indicators used to read the trend of the asset in respect to buyers-sellers ratio, point to oversold conditions.

Gold Steps Into Market Correction Territory

In the longer term, according to the 200-day moving average, gold is in a bearish trend since breaking below the 200SMA on Feb 2 this year. Additionally, in the short term, gold dived below the 50-day and the 100-day moving average also interpreted as bearish conditions.

As per the standard economic definition, gold has entered into correction territory this year, as a 10% drop is considered a market correction. From the all-time high of $2,069 reached in August last year, gold has slipped 17%. To be into a bear market, according to the general definition, gold will have to drop more than 20%.

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