Gold prices have surged this week by around 4% with XAU/USD surge establishing an uptrend resistance as we head into the Easter weekend. The rally defied the on-going onslaught of rising unemployment in the US that has been worsened by the COVID-19 pandemic.
Unemployment claims surge to 6.6 million
This week the number of unemployment claims hit 6.6 million which is way above the projected estimate of 5.5 million and lower than the 6.8 million. On the other hand, the University of Michigan Consumer Sentiment Index dropped to 71.0 which is the worst it has been since 2011.
However, what is driving some positive sentiment from this harsh reality and impact of COVID-19 on the economy are Federal Reserve measures to prevent a recession. The Fed has committed around $2.3 trillion in a loan program on top of the QE plan.
The safe-haven connected the US dollar dipped alongside other government bonds which thus resulted in anti-fiat currency gold prices. However, the broader outlook appears to be constructive but the immediate progress could be at risk if prices drop further.
It appears that the gold prices are vulnerable to drop lower as bullion approaches its vital resistance of $1690.01. the yellow metal has established a support level of $1650.94. Since the bottoming of prices last month there has been a wedge brewing in the background.
Therefore this has shown a bearish trend in which a close under the current support level may be an opening for a reversal of the short-term uptrend. Similarly, there is undesirable RSI divergence which is showing a decline in the uptrend. Any movement to lower places will shift the focus on the $1650.94 support level.
Currently, the rally in gold prices witnesses has established an uptrend resistance and the focus will be on where the prices end in the week heading to the Easter holidays. This is a good spot to minimize long-exposure or enhance protective stops.