Quotes of the precious metal are being corrected in a downtrend, being at around 1883.
Investors are showing an active interest in gold as a defensive asset after the freezing of Russia's gold and foreign exchange reserves against the backdrop of sanctions imposed after the start of a special military operation in Ukraine. According to the statistics of the World Gold Council, in Q1 2022, demand increased by 34%, reaching 1.234K tons, while the volume of supply in the same period was fixed at 1.157K tons. Despite the positive statistics, at the moment one can observe a downward correction in XAU/USD, which is caused by the market's expectation of the US Federal Reserve meeting scheduled for May 4 and the tightening of the US monetary policy parameters.
Additional pressure on the metal comes from its main consumer, China. The outbreak of coronavirus in the country has not yet been contained, and last week there were reports of an increase in the incidence in its capital. Investors are seriously afraid that the authorities may impose quarantine restrictions, similar to those currently in effect in Shanghai (a total lockdown has been introduced in the industrial center, and residents are undergoing daily mass testing for COVID-19). Against this background, according to the data of the National Bureau of Statistics of the People's Republic of China, the index of business activity in the Chinese manufacturing sector in April fell to 47.4 points from 49.5 points, continuing to fall from the psychologically important level of 50 points separating growth from recession. Business activity in the non-manufacturing sector fell even more and amounted to 41.9 points against 48.4 points in March.
Thus, the number of gold contracts decreased to 218.0K from 239.8K a week earlier, according to the US Commodity Futures Trading Commission (CFTC).
On the daily chart, the price is correcting as part of a local decline wave, approaching a global support line located in the area of 1810. Technical indicators have already reversed and issued a signal to open short positions: fast EMAs on the Alligator indicator continue to expand the range of fluctuations, and the histogram of the AO oscillator, having moved into the sell zone, forms descending bars.
Support levels: 1870, 1810 | Resistance levels: 1916, 1978