Fundamental Analysis for the Week of May 17th – 21st:
1. Expectation towards inflation has basically been fully reflected in the market, therefore should not continue to support the price of gold at its current level.
2. The Fed is less likely to change its easing policy, so there should be more stability in the market.
3. The Dollar Index is currently stable, and as the monetary easing policies maintain for further periods, it may continue to trend down, providing short term support for gold.
4. In terms of the epidemic in India, as the market continues to digest its effects on the Indian economy, if there is a decline in the number of daily new cases of Covid-19, market participants will favour riskier assets, and thus the momentum for a gold price increase will weaken.
Based on the factors above, we expect high volatility for this week. Long positions should be adjusted to control the overall risks.
Fundamentals will dictate the gold price for this week, and both fundamentals and technical factors should be taken into account during the latter half of the week. On the upside we see 1,850 as an important level while investors should pay attention to the 1,820 and 1,800 levels on the downside.
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