Gold finished trading on Wednesday with a moderate growth, at 0.35%, despite the significant strengthening of the dollar index, which during yesterday's trading reached its maximum since mid-2017. Previously, these contracts had a very close inverse correlation.
This market reaction can be explained by the influence of two factors. First, investors' concerns about the prospects of the global economy sharply increased yesterday, which increased investor interest in risk-free assets.
The second reason for the strengthening of gold, was the fact that on Wednesday a very strong influence on the trading had not only fundamental, but also technical factors. On the eve the price reached its lowest level since the end of December 2018, which caused a partial fixation of short positions by speculative traders.
Today, the situation has not changed fundamentally, and gold retains the potential for continued corrective growth. Interest in this asset remains high against the background of a significant drop in Chinese stock indexes. The Shenzhen Composite lost in the price of about 2.2%. The statements by the Bank of Japan also contributed to growing fear among investors. The Bank of Japan changed the guidelines for its future monetary policy, as the outlook for the economy is causing increasing concern of the regulator. A very strong US dollar remains a deterrent for gold, but it is possible that after updating multi-month highs, the dollar index can go away for a correction, supporting the development of a rolling back movement in gold.
Among the statistical reports today, the focus of investors will be data on orders for durable goods in the US in March.
On the chart, after the price fixes above 1270.00, a correctional wave develops, the main target for which is the level of 1279.50. Accordingly, today we expect further growth of quotations to this mark, after which the downward movement can be resumed. In the coming days, most likely, we will not see the price exit from the 1270.00-1279.50 range.
Resistance Levels: 1279.50, 1284.00, 1287.50;
Support levels: 1270.00, 1263.00, 1260.00.
The main scenario - growth to 1279.50-1280.50 and the resumption of the downward movement.
Alternative scenario - consolidation above 1279.50 and growth to 1284.00
Today, as before, short-term longs remain relevant, since we receive the corresponding signals from the technical and fundamental analysis.