Weekly data: Oil and Gold price action after Chinese ease on Covid restrictions

The US energy department announced on Friday that it will start repurchasing crude for the Strategic Petroleum Reserve – the first purchases since releasing a record 180 million barrels from the reserve this year in an effort to support the economy from increasing fuel costs.

On the technical side we see the price continuing the downward momentum with the price currently trading just below the resistance level of the 23.6% of the Fibonacci around the $75 area. If the bearish movement is continued we could expect some support around the $72 area which was the last time the price reacted before a minor swing and a second level of support around the $70 price area which consists of the lower band of the Bollinger bands and also the psychological support of the round number.

Gold-dollar, daily

Price of gold declined following the FED meeting last week only to make back some gains on last week’s losses after a decline on the US Dollar this Monday. After the Federal Reserve Chair Jerome Powell’s speech last week about the FED’s dedication to stick to its original strategy of further interest rate hikes to minimize inflation, it pushed the price of the yellow metal even lower. For a steady rebound on the gold price to happen we need to see the FED end the interest rate hike.

Although gold is seen as an inflation hedge, higher interest rates raise the opportunity cost of holding bullion. Meanwhile in China , the world’s top gold consumer, Covid cases are on the rise which could potentially affect the physical demand for the metal.

From the technical point of view the price broke below the wedge formation that was formed in the last month. This could mean a reversal to the downside if the price manages to break below the support area of $1,780 which consists of the 61.8% of the daily Fibonacci retracement level and the 20 day moving average. If this is the case then we can expect a first point of support around $1,748 level which is the 50% of the daily Fibonacci retracement level and the psychological support area of the round number.

If further continuation to the upside is seen then we can expect the price to face some  strong resistance around the $1,824 area which consists of the 78.6% of the Fibonacci, the upper band of the Bollinger bands and also the upper level of the latest bullish wedge formation.

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