Gold Beaten Down By Growth-Related Fears

(April 25th, 2022 - Premium ANALYSIS)

• Chinese coronavirus cases spurred concerns about global economic growth.
• Stocks remain under selling pressure as investors rush to safety.
• Gold is technically bearish and near a critical static support level.

Sustained demand for the American currency has pushed the gold price to a fresh multi-week low of $1,891.29 a troy ounce. The main catalyst for the ongoing dollar’s demand came from China, as the country seems unable to control the coronavirus outbreak, now spreading into some Beijing districts. Companies halting operations in the area are expected to steepen current supply-chain issues to the detriment of local and global growth.

Asian shared plunged, dragging European and American indexes also lower. Wall Street sees no relief bounce, and the three major indexes trade in the red after Friday’s slump, with the Dow Jones Industrial Average down over 300 points.

Meanwhile, government bond yields are in retreat mode amid resurgent demand for safety. Higher bonds usually mean lower yields, and the 10-year US Treasury note is currently yielding 2.79%, well below the peak at around 3% from last week.

Gold Technical Outlook

After the failed attempt to regain the $2,000 threshold, gold has been on the back foot. The daily chart shows that the metal has accelerated its slump below a mildly bearish 20 SMA and is quickly approaching a mildly bullish 100 SMA. Technical indicators, in the meantime, head firmly lower within negative levels, reflecting strong selling interest.

The 4-hour chart shows that technical indicators reached oversold conditions before partially losing their bearish strength. At the same time, the metal is developing far below all of its moving averages, with the 20 SMA having crossed below the longer ones. The metal bottomed at $1,890 back in March, an immediate support area, and the level to break for a continued decline.