On Tuesday, March 8, gold traded to an intraday high of $2,078, about $10 below the all-time high of $2,088 set in August 2020. The current decline in gold is since January when gold touched a low of about $1780. A dynamic rally in February led to a rise in gold prices of about $300 until Tuesday of this week, when gold traded at $2,078. On Wednesday, March 9, gold opened higher than Tuesday's closing price of $2043, but closed sharply lower, causing the price to fall $72. Tuesday's strong decline resulted in a 3.49 percent drop in the value of gold, the largest one-day drop in 2022.

The most active April Comex contract, the gold futures benchmark, is currently fixed at $1990.20 as of 4:45 p.m. ET, down a net $10.30 or 0.51%. However, this decline is largely attributable to a stronger dollar. Currently, the dollar is up 0.63% and the dollar index is fixed at 99.12. Although gold prices are lower today, this is entirely the result of a stronger dollar and some purchases of gold.

Spot gold is currently trading at $1988.60, a net loss of $8.60 for the day. The Kitco Gold Index shows gold down $12.40 due to a stronger dollar and up $3.80 due to some purchases, resulting in a net change of -$8.60 for the day.

This week's price action marks the beginning of the first pullback since the end of January. Gold has now fallen from Tuesday's intraday high of $2,078 to today's low of $1,960, a drop of about 0.382%. The 0.382% is an important Fibonacci retracement figure. A shallow price correction based on Fibonacci retracement levels would start at 0.236%, followed by a 0.382% decline and a strong correction retracement of up to 0.618% or 0.78%. On a technical basis, these four Fibonacci retracement levels are the most important numbers to watch. Technical traders use these levels to monitor support levels that may indicate the end of a correction.

That said, gold is still in the fully bullish category based on a study of three different moving averages (50-day, 100-day and 200-day). Market technicians use the 50-day, 100-day and 200-day moving averages as benchmarks to determine their short-, medium- and long-term market sentiment. If the current pricing of a stock or commodity is above the 50-day moving average, market technicians interpret short-term market sentiment as bullish. The 100-day moving average is used to determine medium-term market sentiment, and the 200-day moving average reveals long-term market sentiment. If the 50-day is above the 100-day and the 100-day is above the 200-day, it is interpreted as fully bullish.

Chart-2-Daily-candlestick-chart-with-MA.gif

The second K chart is a daily candlestick chart of gold futures, which clearly shows that gold is fully bullish. The 50-day moving average is currently fixed at $1,861.70, followed by the 100-day moving average at $1,832.20 and the 200-day moving average at $1,816.10. In the last week of February, when the 100-day moving average broke above the 200-day moving average, the price of gold was completely bullish. As the price of gold continues to rise, we can see that the three moving averages are in a divergence period, which simply means that the price is rising between each moving average.

Based on the two technical studies we discussed above, we can conclude the following. First, from a technical point of view, the low in gold futures has hit the 0.382% Fibonacci retracement level, which is an acceptable level if the current correction will unfold as a shallow correction, as shown in Figure 1. It will stabilize here, but whether the gold price stays at that level ($1964) or trades below it is an important level. Second, even though this week's correction caused the price to fall 5.48% from Tuesday's high to today's low, the three moving averages remain fully bullish, as shown in Chart 2.

Finally, while technically we can see further price declines, this week's price drop did not cause significant damage to the K chart, but rather led to a price pullback from Tuesday's intraday highs.

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Good luck with your trading, as always.

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