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Growth in Trading Volumes for all Types of Derivative Contracts for Gold

3/22/2023 11:00 AM

The XAU/USD pair is consolidating near 1940.00 after two consecutive sessions of active decline, as a result of which the instrument retreated from the record highs of April 2022 and the psychological level of 2000.00.

Pressure on gold was exerted by the growth in the yield of US Treasury bonds, as well as massive profit-taking on long positions ahead of the US Federal Reserve's monetary policy meeting. The market expects to raise the interest rate by no more than 25 basis points, while assuming that the regulator may announce a temporary pause in the current cycle of tightening monetary conditions. The latter may be due to an attempt to mitigate the growing crisis in the banking sector; however, it is likely to have a negative impact on investor sentiment. At the moment, about 82% of analysts predict that the Fed will still raise the cost of borrowing by 25 basis points, but will not indicate the clear likelihood of another increase in May.

Significant changes have recently taken place in the gold contract market. According to the world's largest financial derivatives market CME Group Inc., since March 7, the volume of trading in all types of derivative contracts for the precious metal began to increase sharply. On March 6, the futures position of investors in gold consisted of 155.212 thousand contracts, and the option position consisted of 50.076 thousand, but after two weeks of trading, on March 21, the futures position was 415.048 thousand contracts, and the option one was 98.433 thousand. Thus, the inflow of investment capital into the asset more than doubled, which is quite rare for such a conservative asset and may signal a continued growth in quotations in the future.

Bollinger Bands on the daily chart show a steady increase. The price range is slightly narrowing, being spacious enough for the current activity level in the market. MACD reversed towards declining, having formed a new sell signal (located below the signal line). Stochastic is showing similar dynamics, rapidly retreating from its highs, indicating the risks of overbought gold in the ultra-short term.

Resistance levels: 1952.53, 1974.22, 2000.00, 2015.30. | Support levels: 1930.00, 1914.44, 1900.00, 1878.84.

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