Gold is falling fast, having lost about 3 to 1940 from Mondays peak. On Monday, the bulls are locally capitulating after an unsuccessful attempt to push the price above 2000.

It would be a mistake to attribute golds fall to an expensive dollar. Since the start of the year, the dollar index and gold have had a more than 80 correlation versus 0.34 in 2021, reflecting that investors see gold and the dollar as defensive assets amid the RussiaUkraine conflict.

Yesterday the dollar index slowed its rise towards the end of the day. It reversed to a decline on Wednesday morning, while gold has been actively declining since the beginning of the week, reinforcing their close correlation.

Golds recent retreat could be a sign of hope for a détente in the European conflict and a desire to lock in profits from the powerful movement of recent days. As it is difficult to find signs of deescalation in the news, we are leaning towards the second option.

With EURUSD near 1.08, GBPUSD near 1.30 and USDJPY one step away from 130, the dollar is near historical extremes. The same can be seen in the Dollar Index, which since last week has been trading above 100, a psychologically crucial round level.

Since the beginning of February, gold has found support on the declines toward its 50day moving average in the last rally. If a test of this level in the coming days also confirms the resilience of this support, we could see a new high soon.

On the longterm gold chart, the pullback from the…