3.4 Emilywison’s Gold Analysis of CAPITALCOM:GOLD — TradingView

market review

🌙 Yesterday (March 3), the spot gold market experienced historic fluctuations. After rising for four consecutive days, gold prices plummeted, once falling by more than $230, with a daily decline of more than 5%, a rare record in recent times.

🌞 Gold prices resumed part of their recovery at the opening today, recovering from their lowest levels. As of this writing, it is trading in a range of $5,150-$5,180, with daily gains of approximately 1.6%.

This sharp decline is not caused by a single factor.

1. As the conflict in the Middle East escalated beyond expectations, market panic intensified sharply, and the VIX fear index hit its highest level since November last year. In this particular case, investors did not follow traditional safe-haven logic and turn to gold. Instead, in response to margin calls or redemption pressure from other positions, they choose to sell all liquid assets, including gold, to gain liquidity. This extreme mentality of valuing liquidity led to a rare simultaneous sharp decline in the stock market, bond market and gold.

2. The escalation of the conflict has led to a sharp rise in oil prices, which has increased market concerns about a rebound in inflation and prompted the Federal Reserve to reassess the path of monetary policy. According to data from the Chicago Mercantile Exchange (CME), the market’s expectation of keeping interest rates unchanged rose to 97.4% in March, while expectations of a rate cut this year have dropped significantly. This pushed the U.S. dollar index and U.S. Treasury yields higher, with the U.S. dollar index briefly breaking through the 99 mark, hitting a new high since January. As a non-interest-bearing asset, the holding cost of gold has risen sharply, putting downward pressure on its price.

3. At that time, the conflict between Russia and Ukraine broke out, causing oil prices to soar and inflation to become serious, eventually forcing the Federal Reserve to significantly raise interest rates. The U.S. dollar strengthened, and gold was under pressure throughout the year. The trading logic of the current market is similar: geopolitical conflicts → rising oil prices → inflationary pressure → difficulty in loosening monetary policy → rising real interest rates → bearish gold.

4. The price of silver fell nearly 13% that day, far exceeding the decline of gold. This high volatility is due to its characteristics as an industrial commodity (concerns about the economic outlook) and the reduced risk of covering previous short positions. The plunge in silver prices intensified the sell-off in the gold market.

📈 Technical Analysis

After yesterday’s sharp fluctuations in gold prices, the technical pattern was disrupted, but today’s rebound has temporarily given a chance to breathe.

Candlestick pattern: Yesterday’s candle closed with a long real body and prominent upper and lower shadows, forming a “bearish engulfing” pattern. This pattern has actually broken out of the previous day’s uptrend, sending a strong signal of a short-term trend reversal.

Moving average: Although the medium and long-term moving averages (such as the 20-day and 60-day moving averages) are still in an upward trend, the gold price broke through the 5-day and 10-day moving average during yesterday’s decline. Currently, the 5-day moving average (near $5,300) is trending lower, posing short-term resistance to gold prices. Today’s rally encountered initial resistance near the 20-day moving average (around $5,190-5,200). Whether gold prices can regain control of this level will be key to assessing the strength of the rebound.

MACD indicator: On the daily chart, the fast MACD line has fallen back from its highs and is about to form a bearish crossover with the slow line. The red momentum bar has clearly contracted to close to zero, indicating that upward momentum is rapidly declining and bearish power is beginning to accumulate.

RSI: After the price dropped sharply yesterday, the daily RSI quickly fell back from the overbought zone (above 75) to around 40, entering the weak zone. However, this rapid short-term decline has generated some oversold signals, providing a technical correction for today’s rebound.

💪 Support and resistance levels:

Support: Initial support is located in the $5,070-5,080 range, which is the lowest level recorded during today’s trading session; the main psychological support level is located at $5,000.

Resistance: Short-term resistance is at $5,200 (20-day moving average and psychological level). If this level is breached, additional resistance will exist in the $5250-5280 range (near the 5-day moving average).

The price of gold is expected to fluctuate significantly in the range of US$5,000-5,300 in the near future. If the conflict escalates, gold prices may gain new support from safe-haven buying, but attention should also be paid to the hedging pressure brought about by the rise in the US dollar. For investors, the current market has entered a very difficult stage, and there are huge risks in chasing the highest and lowest price levels. Long-term investors can monitor gold’s performance within a certain range.