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Gold price capped by resistance, WTI holds but aluminium weighs on support

Technical outlook on gold, WTI and aluminium amid soaring US inflation and demand concerns in China due to Covid-19 lockdowns.

Gold capped by key resistance area

The gold price shot back up again these past few days to near one-month highs, as fears of swiftly rising inflation outweighed pressure from a strengthening US dollar and treasury yields amid expectations for a faster pace of Federal Reserve (Fed) policy tightening.

The precious metal has been testing the $1,959 to $1,974 key resistance area which consists of the highs of September and November 2020, January 2021, and February 2022 and as such is expected to cap. If overcome, however, the psychological $2,000 mark may be back in play.

Minor support below the 5 April high at $1,944 sits at the $1,916 early April lows and can also be spotted along the 55-day simple moving average (SMA) at $1,905.

Further down lie the recent trading band’s troughs between the mid- to late March lows at $1,901 to $1,891.

WTI stabilises above $92.45 mid-March low

WTI’s decline amid US president, Joe Biden, and the International Energy Agency (IAE) members’ massive release of strategic oil reserves and demand concerns in China due to Covid-19 lockdowns has taken its price to $92.69, close to the $92.45 mid-March low which offers support.

Failure there would put the pre-Russian invasion of Ukraine levels of around $90 back on the map. Minor resistance may be encountered along the 55-day SMA at $98.49, the psychological $100 mark and the breached five-month uptrend line, now resistance line, at $100.10.

While last week’s high at $104.80 isn’t bettered, the recent downtrend remains intact since a series of lower highs and lower lows can clearly be made out on the daily chart.

Aluminium weighs on key support at $3,223

Aluminium prices fell to their lowest since mid-March’s $3,223 per tonne low as Covid-19 lockdowns in top consumer, China fuelled worries about slowing demand for industrial metals.

Prices of the metal used in construction, transport and packaging have already fallen by over 12% from their $3,733 24 March high and are getting dangerously close to key support at $3,223, a drop through which would engage the January high and February 11 low at $$3,109 to $3,057. Further down the February low can be spotted at $2,964.

Resistance below the one-month downtrend line at $3,402 can be found between the 7 April low and the 55-day SMA at 3,341 to 3,351.

For the bulls to be back in control, a rise above the last reaction high at the 5 April high at $3,514 would need to be seen, something which looks unlikely at present, given yesterday’s swift decline of around 4%.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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