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Tuesday, May 24, 2022
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Gold bounces back but bearish bias stays intact

The gold prices bounced back in the international market last week after facing a retreat in the preceding week, though a slight bearish bias stays intact. The gold prices gained 1.17 percent last week, surging from $1,797 to $1818.10 per ounce. The prices have surged during the four out of last five weeks in the international market, with the first week-on-week increase in the current year.

Meanwhile, the price of gold in Pakistan ended a two-week losing streak last week, gaining 0.68 percent on a week-on-week basis. The price of 10 grams gold increased from Rs102,200 to Rs102,900 during the last week, after witnessing a decrease of 1.21 percent and 0.10 percent in the preceding two weeks respectively.

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The relatively lower increase in local gold price was due to the rupee’s appreciation against the US dollar during the period under review. The rupee appreciated by 0.34 percent against the American currency, recovering from 176.67 to 176.07 during the aforementioned period.

The main factor behind the increase in the prices of the yellow metal was the struggling US dollar. The US dollar headed for its largest weekly fall in eight months, turning commodities into a more affordable purchase for holders of other currencies. The US dollar index was 0.1 percent higher at 94.931, but finished the week down by about 0.9 percent, representing its worst weekly showing in eight months. The other factor that supported the yellow metal to make gains was retreating US Treasury bond yield. The benchmark 10-year US Treasury bond yield, which advanced to its highest level in two years above 1.8 percent earlier in the week, reversed its direction and retreated to 1.7 percent area, helping gold preserve its bullish momentum.

From a technical perspective, the Relative Strength Index (RSI) indicator on the daily chart stays afloat above 50, suggesting that sellers remain on the sidelines for the time being. Additionally, the 20-day SMA, crossed above the 50-day SMA, confirming the bullish shift. Gold closed the last week above the 200-day SMA for the fourth straight day. On the upside, the key resistance area seems to have formed at $1,830, where the Fibonacci 23.6% retracement of the uptrend that started in October and ended in mid-November is located. With a daily close above this resistance, gold can target $1,850 ahead of December highs at $1,870.

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