Gold Intraday Outlook Apr 20: Early Signs of a Change in Market Sentiment

Last week, we might have seen a change in market sentiment, with U.S. indices up and gold down...

The correlation between gold price and the U.S. equity markets had seemed to be positive recently, but this appears to have changed last week. The tech-heavy Nasdaq ended up 6.1% for the whole week on Friday, Dow Jones gained 2.2% and S&P rose 3.0%. Meanwhile, spot gold fell 0.8% week-on-week.

With a smaller-than-expected decline in China's March industrial production and U.S. jobless claims number retreating, the latest data might suggesting that the coronavirus impacts have peaked. It is worth noticing that the tech-heavy Nasdaq has outperformed the Dow Jones and the S&P 500, which might point out that investors are buying high beta stocks amid improving market sentiment. It is still early to decide whether this would mark a turning point for gold, the intraday outlook for the precious metal does not look decent.

From a technical point of view, spot gold is under pressure as shown on the 1-hour chart. It has formed a double-top pattern, with the neck line broken, and is now trading within a bearish channel. The level at $1,691 may be considered as the nearest intraday resistance, and the first and second support are likely to be located at $1,672 and $1,663 respectively.

Source : TradingView, GAIN Capital

For the longer term, it is worth noting that a bearish shooting star may have formed last week on the weekly chart, while the relative strength index keeps showing a bearish divergence. If it is a turning point for gold, we should see a follow-through bearish candlestick this week.  

Source : TradingView, GAIN Capital

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