Gold plunged $45 an ounce yesterday to $1283, the biggest plummet of the year as US inflation rose more than expectations, showing faster than expected recovery in the world’s largest economy. The precious metal however closed the day above the $1300 handle, showing sound presence of buyers.
As of this writing the yellow metal is being traded near $1300. Support may be seen around $1292, the channel support as demonstrated in the following chart ahead of $1283, the low of yesterday, and then $1277 that is the swing low of the previous wave. A break and daily close below the long term trendline support will be seen as very bearish, opening doors for a dip below the $1200 handle.
On the upside, the precious metal is likely to face a hurdle near $1304, the 200 Simple Moving Average (SMA) and 23.6% fib level ahead of $1321, the 38.2% fib level resistance. The market sentiment is still very positive due to Higher High (HH) and Higher Low (HL) in the recent move.
The Consumer Price Index (CPI) in the US rose by 0.2% last month as compared to 0.1% increase in the month before, up beating the median projection of analysts which was a stable reading at 0.1%. The data might prompt the Federal Open Market Committee (FOMC) policymakers to consider tight monetary policy earlier than previously thought.
China, the biggest buyer of the precious metal, grew at 7.4% during the first quarter of the ongoing year as compared to 7.7% in the same quarter of the year before. The first quarter reading was better than the average forecast of 7.3%, hence the gold bulls cheered the good news from the Asian nation.
Gold is expected to continue the ongoing bullish trend. The metal might test the $1400 milestone in the long run to print a Higher High (HH) on the daily chart.