Fear of economic slowdown hits commodity market
Commodities are in a bloodbath this week. The fall in prices is caused by fear of an economic slowdown. High inflation and continuous war in Eastern Europe cause headaches for investors. Gold is under 1800$ price tag and volume shows that it is not just a quick look, but more extended occupancy. Yesterday, bullion erased -2.32% and closed at 1768.2$ per ounce. To add, today gold continues to decline by -0.83%.
After one and a half month of side-move, gold continues in a massive downtrend from highs above the 2000$ level. Last week, gold tested a low level of downtrend at 1790.5$ (white circle). Then bounced back to 1800s, took the breath for another decline to 1760’s area. The important thing to note is that traded volume in this area rises (rising histogram on the right side of the chart). This could enhance the probability of a continuing downtrend.
4 hours chart of GC (Gold Futures). Break under the 1800s area. Source: Author’s analysis
Levels of interest
The bullion leaves behind only resistances. The first resistance is the mentioned level 1790.5$, which represents the previous low of the downtrend. The next resistance level is the area of “breath” from the beginning of this week around area 1800. And higher is 1838.9$ as Monthly VWAP. Supports are a bit harder to define. The first could be seen in the area 1740$-1692$. And there are no more significant levels of support until level 1600$.
Related: A distasteful month for commodities
The pressure of sentiment
The pressure of sentiment is clear. The economic slowdown and the fear of recession is the main driver of the red numbers in markets. Despite the fact that USA and China try to ease some economic tariffs to ease the pressure investors’ optimism does not rise at all. Frustration continues from higher inflation which affects demand for goods. Despite the fact that gold is seen as safe haven, it does not look like it. We mentioned in several articles, that gold has no interest. This means that assets with interest are now more attractive to investors. There is a high possibility that more bad news from economic sentiment will bring another decline in the yellow metal.