Gold’s price rebounds from a two month low

Gold’s price moved higher in the latest daily sessions, after a very strong previous week for the sellers. Even so, Gold’s price has been able to keep above the lowest level reached in the past months and since its all-time high price back in August, which could imply traders could be patient and waiting for the right news to take action. This report aims to identify and detail the most important subjects possibly moving Gold’s price. At the end, our technical analysis will assist as with an in depth view of the most recent price activity for Gold.

Starting first with updates on the measures brought forward to deal with pandemic. In the US, vaccination continues to roll out swiftly, as the Biden administration has made the matter a priority and of crucial importance. Various sources state that 100 million vaccinations are targeted for the first 100 days, while weekly vaccine supply is also increasing. The world is mostly interested in the public’s health, yet Gold traders on the contrary are looking for openings to place orders. As long as the pandemic continues to affect credit use, job creation and limit consumer confidence, Gold’s price may continue to remain at rather high levels as it managed to do so in the past months. Even though on the surface the situation seems to be somewhat improving and the US Federal Reserve seems to be more optimistic about the economy for the future months, Gold’s recent move lower does not reflect reduced economic risk or a guaranteed economic rebound. We would advise traders to approach Gold’s price with extreme care and focus when placing orders.

In the US, a swarm of headlines regarding the new fiscal stimulus package have taken over the news. Even though the market is currently counting on a new rather large stimulus $1.9 trillion package, some recent data could be very interesting for Gold’s further activity. According to the Congressional Budget Office the U.S. federal budget deficit widened sharply last month. A report by the Wall Street Journal said the monthly deficit widened to an estimated $165 billion in January, compared with $33 billion in January 2020 and $144 billion in December, the CBO estimated in the past days. Market participants may not be paying attention to this kind of news, yet the overall effect of the happening could be increasing economic risk in the long term. Gold’s price could continue to be on the rise, as the US economy’s risk tolerance continues to be on the decline in our point of view.

In the past week the greenback’s movement higher sent Gold prices lower confirming a strong negative correlation between the two instruments. We could say that the relationship between the USD and Gold’s price may be similar in the following sessions. In the next days, some important US financial data to be released, could be of interest to Gold traders as they could move the yellow metal’s price upon release. On the 10th of February we get the US inflation data for January, on the 11th of February we get the weekly Initial Jobless Claims and on the 12th we get the Preliminary Un. Of Michigan Sentiment for February, all to be released in the US session. Caution is advised.

テクニカル分析

XAU/USD 4H chart

Please note, we have not changed our levels since the past report, as the recent trading activity seems to confirm the levels are accurate. At the moment Gold has managed to gain notable ascendance and is currently trading above the (S1) 1835 support level and heading towards the (R1) 1855 resistance line. A breach above the (R1) level can possibly send Gold’s price to test the (R2) 1875 hurdle which was tested twice in January on the 21st and the 29th. In case of a strong bullish market reaction, Gold could even be lifted to the (R3) 1900 round number level, which will also confirm the bulls have dominated the scene. On the contrary, a move lower could send the price activity nearby the (S1) 1835 support level, while a continuous selloff could push the price even lower to the (S2) 1810 support barrier. A clear breach below the (S2) could signal the price activity is possibly moving towards the (S3) 1785 level, as was the case on the 4th of February. From a long term view, the precious metal remains in a downward trend, while in a more short term view, its latest upward momentum points at a sideways motion. Most of the price action since the 11th of January has been between the (R2) 1875 hurdle and the (S2) 1810 support barrier, making them both relevant and considerable. The RSI indicator below our chart is now approaching the 70 level confirming the recent increase in buying orders.

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