ately, the macro market has been super exciting to watch. If you pay close attention to global fundamentals, there is a massive move coming from the big players, also known as the world central banks. Based on the latest news report from CNBC, central banks around the globe are now aggressively moving their gold reserves back to their home countries. The main reason is that they are worried about asset freezing sanctions like what happened to Russia, combined with geopolitical tensions that are getting hotter by the day. Safe haven assets are the number one priority right now, so they prefer to keep their physical gold at home.
Not to mention, data from the world gold Council also shows a new record where 45% of central banks worldwide plan to increase their gold buying volume over the next 12 months. This number has more than doubled compared to the 2020 data. You can imagine how panicked these big institutions are to secure their assets to avoid unpredictable geopolitical risks.
If we look at the futures market data, the open interest position for XAU/USD across major exchanges like Binance, OKX, and Bybit shows a pretty thick number with daily trading volume reaching hundreds of millions of dollars. The long short ratio position is also seen as very competitive around the price of $4.321 to $4.333 per ounce.
Interestingly, looking at the open interest weighted funding rate chart, the market experienced high volatility with several green spikes that indicate a dominant positive funding rate, followed by a sharp drop in gold prices some time ago.
The effect of this volatility is clearly visible on the gold total liquidations chart. There are huge liquidation spikes from long positions that got wiped out massively when the price dropped to a temporary local bottom before slowly crawling back up again.
Now let us move on to the technical analysis on the tradingView chart to see where the market is heading next. If you monitor the chart on the daily timeframe or 1D, the movement of gold after yesterday sharp correction is now trying to hold its position above a crucial area.
To see the area details more clearly, we can widen our view of this daily chart. The market structure shows that gold successfully bounced back after responding to the lower support area pretty well.
If we drop down to a smaller timeframe like the 1 hour or 1H, it is very clear that gold yesterday dropped heavily until it hit the demand order block or demand OB area near the bottom before being pulled back up quickly toward the consolidation zone.
Technically, the yellow zone on the chart is a consolidation zone or sideways area that is currently being tested. For a medium to long term trading plan, we have several important levels that we must watch. The first strong support is in the range of $4.026.000 - $3.966.200. If worst comes to worst and that area breaks, the second support ready to catch the falling price is in the area of $3.413.000 - $3.355.500. On the flip side, if the market wants to continue making a new uptrend, the closest resistance target is quite far away, which is around the zone of $5.050.000 - $4.960.720.
My Opinion
Looking at the combination of fundamental data from the CNBC news and the technical data on this trading chart, I see that the gold correction to the demand OB area yesterday was actually just a market clearing of over leveraged retail positions before the price gets ready for another long rally. The main reason is clear, the push from central banks that keep buying physical gold and securing it to their home countries will be a very strong fundamental fuel for the long term. So, every time there is a deep correction to a strong support area or demand OB area, I think that is a great discount opportunity to start scaling into buy or long positions rather than risking your account shorting an asset whose macro fundamentals are super bullish like this.
Source
⛔ Disclaimer: This article is strictly for informational and educational purposes only. It is not intended as financial advice, and I do not provide any trading signals. All investment decisions are your sole responsibility. Please ensure you conduct your own research (DYOR) before making any trades.
Posted Using INLEO
