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OPEC+ actions put pressure on gold

03 April 2023 146
OPEC+ actions put pressure on gold

Gold prices are actively declining at the beginning of the week. Currently, there are two factors for the fall: fundamental and technical.

According to the fundamental one, the situation for gold worsened after the news from OPEC+ on the weekend.

On Sunday, the Organization of the Petroleum Exporting Countries and its allies announced the production cut of around 1.16 million barrels per day. Previously, OPEC members had been expected not to change their earlier decision on reducing production volumes by 2 million barrels per day until December at their monthly meeting.

According to Reuters estimates, the latest decision will result in an overall cut of 3.66 million barrels per day. It is 3.7% of global demand.

Seemingly, how is this news related to gold? Let’s figure it out.

Oil prices surged by about 5% after the news. Analysts are revising upward their forecasts for oil to $100 per barrel. This means that energy resources might inflate prices in the world through the whole chain of supplies. According to this scenario, we will see a new wave of global inflation in around two quarters, leading to a more active fight against it by central banks. Thus, rates will be kept higher than previously expected, and it will put pressure on gold. As a result, something that benefits oil is currently bad for gold. On this background, the precious metal might continue to decline.

At the same time, analysts now explain the decrease in gold by the dollar’s strengthening and rising U.S. Treasury bond yields. Analysts cannot define the root cause for the metal’s fall. Therefore, they continue to forecast its rise in the near term.

According to the technical analysis, gold broke below the triangle pattern, confirming bearish sentiments on the precious metal. Now this figure will be tested from below, where the fall will continue. The downside target will be the size of this triangle, which is equivalent to the price of $1,991. Support at this level will also be given by the round price of $1,900. Stop-loss will be set when attempting to break above the triangle, or at $1,985.

Gold prices are likely to decline:

Take profit — 1,901

Stop-loss — 1,985

This content is for informational purposes only and is not intended to be investing advice.

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