Fear of inflation and the weak dollar drive gold

May 12, 2021 17:30

As we mentioned in yesterday's analysis, the fear of the possibility that inflation will skyrocket in the United States has been installed again in the financial markets, causing widespread falls in the main stock indices around the world, triggering the well-known VIX volatility index above 22 points. This instability in the market has driven gold in recent sessions, thus reinforcing its status as a safe haven.

For its part, as we mentioned in the technical analysis on Monday, the dollar index yielded 2.11% against the main currencies during April. Consequently, this favours the rebound of gold from the annual lows, after making a double bottom formation in the vicinity of the 61.8% fibonacci retracement level from the highs reached on August 7, 2020. This movement can be explained thanks to the strong negative correlation that we can observe in the correlation matrix between the dollar and gold.

Source: Correlation Matrix of theMetaTrader 5 Supreme Edition platform Admirals

Technically speaking, gold is the safe-haven asset par excellence and if we look at the daily chart we can see how, after the last decreases in the stock markets, it has experienced a strong boost. This has led its recovery to levels above $1,845 per ounce, after finally exceeding its important average of 200 sessions in the red that acted as its main resistance level after confirming the breakdown of the bearish channel, making a pullback to its average of 18 sessions in black.

This new bullish momentum is causing a cross of bullish averages that could confirm the change in trend. As a result, it could further push the price in search of its current main resistance level, in the green band. 

Currently, we can see that its stochastic indicator is at overbought levels, so we cannot rule out that the price may make some correction in search of support to gain momentum.

Source: Admiral Markets MetaTrader 5. GOLD daily chart. Data range: from January 10, 2020 to May 12, 2021. Prepared on May 12, 2021 at 11:20 am CEST. Keep in mind that past returns do not guarantee future returns.

Evolution in the last 5 years:

  • 2020: 21.86%
  • 2019: 15.45%
  • 2018: -3.22%
  • 2017: 12.75%
  • 2016: 10.12%

With Premium Analytics, you can follow all the important news related to gold and get the latest macroeconomic data through the news and the economic calendar offered by Dow Jones:

With the Admirals Trade.MT5 account, you can trade Contracts for Differences (CFDs) on gold, as well as more than 3000 stocks! CFDs allow traders to try to profit from the bull and bear markets, as well as the use of leverage. Click on the following banner to open an account today:


The given data provides additional information regarding all analysis, estimates, prognosis, forecasts, market reviews, weekly outlooks or other similar assessments or information (hereinafter “Analysis”) published on the websites of Admiral Markets investment firms operating under the Admiral Markets trademark (hereinafter “Admiral Markets”) Before making any investment decisions please pay close attention to the following:

  1. This is a marketing communication. The content is published for informative purposes only and is in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.
  2. Any investment decision is made by each client alone whereas Admiral Markets shall not be responsible for any loss or damage arising from any such decision, whether or not based on the content.
  3. With view to protecting the interests of our clients and the objectivity of the Analysis, Admiral Markets has established relevant internal procedures for prevention and management of conflicts of interest.
  4. The Analysis is prepared by an independent analyst, Roberto Rojas (analyst), (hereinafter “Author”) based on their personal estimations.
  5. Whilst every reasonable effort is taken to ensure that all sources of the content are reliable and that all information is presented, as much as possible, in an understandable, timely, precise and complete manner, Admiral Markets does not guarantee the accuracy or completeness of any information contained within the Analysis.
  6. Any kind of past or modeled performance of financial instruments indicated within the content should not be construed as an express or implied promise, guarantee or implication by Admiral Markets for any future performance. The value of the financial instrument may both increase and decrease and the preservation of the asset value is not guaranteed.
  7. Leveraged products (including contracts for difference) are speculative in nature and may result in losses or profit. Before you start trading, please ensure that you fully understand the risks involved.
Admirals An all-in-one solution for spending, investing, and managing your money

More than a broker, Admirals is a financial hub, offering a wide range of financial products and services. We make it possible to approach personal finance through an all-in-one solution for investing, spending, and managing money.