Gold's freefall meets historical support

March 31, 2021 15:00

Gold is the global benchmark safe-haven asset and its price tends to rise with uncertainty. However, its price is currently in free fall due to improvements in the economic outlook and the strengthening of the dollar.

The uncertainty generated by the coronavirus seems to be stabilizing. Vaccination programs continue to advance. Furthermore, in some regions of Europe, restrictions have been tightened to prevent an outbreak of a third wave during the Easter holiday.

Due to this, investors have intensified the purchase of riskier assets such as equities, something that is reflected in the positive evolution of the main world stock markets. This shows that expectations about the recovery of activity remain intact, despite the recent rebound in the number of new daily cases of coronavirus worldwide.

In contrast, the price of safe-haven assets such as gold seems to be deflating. 

And now that the Evergreen freighter has finally been freed, the Suez Canal is back at full capacity. This is a key piece of news in the normalization of international maritime trade, since this route globally represents close to 10% of freight traffic. Consequently, there has been a reduction in global economic uncertainty in the short term.

The daily gold chart below clearly shows the downward channel on which the price has been moving since the beginning of August 2020.

Currently, the price of gold is at a key level, the historical support that served as a foothold for buyers during the second quarter of 2020 and has recently served as a benchmark in the metal's latest bounce.

However, this rebound has lost momentum and once again the price of gold is about to break through this historic resistance. The next few days could be key in the evolution of the price of the metal, especially on Friday, with the publication of the report of Non-Farm Payrolls of the United States (NFP). 

Source: Admirals MetaTrader 5. GOLD daily chart. Data range: from November 12, 2019, to March 25, 2021. Prepared March 25, 2021, at 10:00 am CET. Keep in mind that past returns do not guarantee future returns.

Price evolution in the last 5 years:

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

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