31.03.202114:58 Forex Analysis & Reviews: Gold's spring blues will be replaced by a wave of positive

Gold trades in confusion, showing not the best dynamics. However, experts do not record any reasons for further subsidence of the popular defensive asset.

According to experts, the yellow metal is not expected to drop in price in the near future. From a technical analysis point of view, gold prices have retreated from their historic highs and are near the support level of $1,680 per ounce. Experts are confident that in the coming months, the cost of the metal is unlikely to drop below $1,600 per ounce.

Market participants are concerned about the long-term correction of the precious metal. Note that in the first three months of this year, gold plummeted by almost 10%. Now the yellow metal is in the neutral range of $1,670– $1,765 per ounce. Analysts were counting on a similar correction, expecting another reversal to the growth of gold in the short term. On Wednesday morning, gold was trading near $1,685– $1,686, trying to catch up.

Many experts are inclined towards a positive scenario, noting that the rise of the precious metal to the psychologically important level of $2,000 per ounce is possible in the second half of 2021. The recovery of the "gold" prices will be helped by such factors as inflationary expectations and the weakening of the US dollar, which is inversely correlated with gold. According to Ole Hansen, commodity strategist at Saxo Bank, the likelihood of a "breakout" for gold is quite high. The rise of the precious metal above $1,765 per ounce will increase demand from investors and traders who have recently cut long positions in gold futures.

Market participants are alarmed by the fact that the leading precious metal is "out of fashion" among retail investors. The outflow of funds from gold ETFs has reached impressive levels throughout this month, and this trend continues. Investors' interest in gold as a defensive asset has undergone downward changes. This was facilitated by the revival of demand for risky assets and a positive attitude towards the US economy.

According to analysts, the collapse of gold by about 10% since the beginning of the year (to $1,725 per ounce and below) gives hope for further recovery. Experts believe that the "spring blues" of the precious metal will be replaced by a confident rise in the latter. The determining factor for further positive dynamics was the continued demand for the yellow metal on the part of central banks.

The optimistic scenarios of some analysts contribute to the positive mood. Many of them are confident that the new target for gold will be $2,500– $3,000 per ounce. A more realistic forecast assumes that the precious metal will rise to $1,850 per ounce. Such a development of events is permissible in the absence of a strong tightening of monetary policy. The only alarming moment for investors is the noticeable volatility of gold. However, it does not interfere with investments in a traditional safe-haven asset, despite a series of ups and downs in its price.