Correction in gold continues

Gold is trading below the key $2,000 level again. Pressure from a stronger US dollar and increasing concerns about interest rate hikes is keeping the precious metal from moving above that level. Strong fundamentals are needed for a new upward momentum, which are not yet evident.

High inflation rate in the UK has reinforced expectations that the UK central bank will tighten its monetary policy. Previously, we wrote that central banks' policy on rates remained tight even after inflationary pressure had evidently eased. There seems to be a reason for this decision. Countries need to anchor increasing prices. It is expected that rates will remain high for a longer period of time. Therefore, gold could soon be revalued in view of the new data.

After a boom in demand for gold, there has been a cooling-off period!

Some central banks started to sell gold. Turkey, last year's biggest buyer of this metal, sold 15 tonnes of gold in March. This move brought the country's reserves down to 572 tonnes, according to the World Gold Council (WCG).

The National Bank of Kazakhstan became another seller. The bank sold 10.5 tonnes of the precious metal in March. During the first months of the year, gold reserves of the National Bank of Kazakhstan decreased by 19.6 tonnes. The country's total gold reserves now amount to 332 tonnes.

WGC experts also expect a slowdown in gold consumption by China due to its seasonal nature, which may have an impact on gold demand in April and May.

According to technical analysis, gold went from an uptrend to a horizontal correction. A downtrend is likely to start forming now. There have already been attempts of such a movement this week.

The level of recent lows could be the downside target, which matches the price of $1970. A Stop-loss can be placed upon breaking up the resistance level, which was also established this week. A Stop will be triggered when the price reaches $2020.

A decline in the gold price:

Take profit – 1970

Stop-loss – 2020