Yesterday Gold had a drop to 1,890, a weekly support zone that coincides with the level of February 25.
This fall was as a result of reports indicating progress in the talks between Russia and Ukraine. Positive expectations generated strong volatility and an increase in equity market gains, which hurt gold.
After gold fell to 1,890, a very strong technical bounce occurred which favored gold. The metal also benefited from a decline in the 10-year treasury bonds that went from levels above 2.50% to fall below 2.40%.
High volatility is expected to continue, with gold still affected by significant swings in the Treasury bond market and in market sentiment sensitive to headlines about Russia's invasion.
On the 4-hour chart, we can see a downtrend channel that was formed since March 24, between the zone of 1,966 to 1,890. This channel was broken yesterday and now gold is consolidating above this level. It is likely to continue its uptrend until the zone 7/8 Murray located at 1,937,
XAU/USD is currently trading above the 200 EMA located at 1,920 with a slightly positive bias. There is a key support zone that is located at 1,915. As long as gold trades above this level, a recovery towards the 21 SMA located at 1,935 is expected in the next few hours.
Additionally, a sharp break of the 21 SMA and 7/8 Murray could accelerate the move higher and we could expect gold to reach the 1,966 level and even the psychological level of 8/8 Murray at $2,000.
On the contrary, a return below 1,915 could resume the bearish movement and we could expect a decline towards the support of 1,890 and the price could reach 6/8 of Murray at 1,875.
Our trading plan is to buy gold above 1,915 or above the 200 EMA located at 1,920, with targets at 1,935, 1966 and 2,000. The eagle indicator supports our bullish strategy.