ECB delivered the goods and Gold rallied. Following are few observations worth noting –
- Gold dropped along with Euro following the ECB announcement to a daily low of $1237
- Prices recovered tracking the sharp recovery and then a rally in Euro
From the above points, it is easy to conclude, the rally in the metal is not due to ECB’s easing, but due to weakness in the USD.
Euro moves have determined greenback’s trend against other majors and Gold today.
Gold’s reaction clearly tells us the so called easing efforts (negative rates, more QE etc) are not well received by markets. Otherwise, the yellow metal would have ignored the USD and rallied while EUR was down and vice versa.
Coming back to Gold, prices have inched higher, but the bearish price-RSI divergence is still intact. Check out the daily chart below
- For me it is a “sell on rise” thing unless I see a clear break above $1284 levels.
Above $1284, prices could test $1300-1310 levels, while on the downside area around $1250 could act as a support, which if penetrated would open doors for a slide to $1224.56 levels.