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Andreas Zanin
Analysis | May 26, 2021

Analysis and trading scenarios: XAUD/USD

Gold volatility has moved sharply higher in recent weeks and the forgotten safe haven trade is now attracting more investor interest but after the recent sharp rise higher will Gold continue higher or will we see a correction?

The recent move lower in real rates, accompanied by US dollar weakness has seen gold rebound from the end-March low. Gold has risen driven by high inflation expectations, US Fed policy, as well as increased volatility in crypto currencies and equities which is leading traders to move back to Gold. We are now seeing inflows to gold from Cryptocurrencies. ETF inflows have moved up  and central banks have also returned to net purchasers – taking 160 tons in March, with the biggest buyers being Hungary and Japan. All these factors have helped to firm Gold which has moved back to a range that closely reflects the level implied by US 10-year real rates…

 

Gold Higher from Here or a Correction Coming?

 The Fed balance sheet should be watched closely for clues to Golds direction and so too should the USD. The US Dollar Index is at major support and a break higher would be bearish for Gold and a  break lower bullish.

 

Our view is that in the short term the USD will mount a rally which will probably see corrective action to the downside in Gold but longer term it could well move to new highs – our view of the key levels of support an resistance to watch on the chart below. We have first level of support at 1875.00 and major support at 1775.00. We would expect corrective action in the short term but at some point we expect a test of the huge 1950.00 level.

 

Research provided by LearnCurrencyTradingOnline.com

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