• 23 May 2022

Gold has emerged as an important asset class with a series of interesting anecdotes from history. Apart from being a safe haven asset that can withstand the inflationary pressure of currency and other financial crises, importance of gold has also been derived from the social construct. History of empires was written and erased over gold and bullionism. Before 1970, gold was taken as a standard for the U.S monetary system. Gold is argued to be an effective hedge to protect investors against inflation. In this time of red hot inflation, gold has emerged as a comfort cushion for risk averse investors. Since Gold is denominated against the dollar, the investor of Gold gains from the falling dollar during inflation. Another interesting evolution in the subject of Gold is the unleash of digital gold, which allows investors to virtually hold the yellow metal. It can also be a collateral for loans and other forms of debt approvals.

On 20th May, Gold prices soared due to the falling dollar and the stock market sell off. Russia is the third largest producer of gold. Hence, the price of gold touched above 2000 USD per ounce due to safe haven status and supply chain disruption. Based on technical analysis, the formation of higher highs on the dollar Index has limited the bullish breakout and uptrend of the Gold. The technical analysis of Gold shows that XAU/USD proceeds to the extremely overbought territory in the Relative Strength Index indicator around the 2000 USD piece level. On the daily chart, 1780 acted as a strong form of support. The daily chart looks bullish and may touch 1880 levels, where the 100 day moving average(DMA) is placed. It is observed that 100 DMA is a strong resistance for Gold.

Please read: Oil is the only black!


- Shreya Cherian