Risk-off sentiment emerged underlying theme across the financial markets on Wednesday, with the XAU/USD (gold prices in terms of the US dollar) turned out to be one of the strongest safe-haven behind the yen. Gold prices rallied to fresh weekly highs at 1109.70, piercing through the 100-DMA placed then at 1105.61, as the market sentiment soured after the oil prices hit the lowest levels since 2003, especially with the US oil below $ 27. However, the bullish run lost legs and the prices retreated during the NY session, as risk appetite improved amid a recovery in oil prices and in Wall Street as well. The bullion gave up nearly $ 10 from daily tops and closed the day in the green, but a whisker below $ 1100 – psychological levels, despite softer US CPI figures which raised doubts over the Fed’s outlook on the interest rates.
As for today’s trade in running, the yellow metal sees a solid rebound from 1097.12 lows, swinging back above 1100 levels to now trade around $ 1104. The prices rebounded higher as risk conditions deteriorated after the oil price recovery fizzled towards late-Asian trades and weighed over the Asian equities and refuelled the demand for safety bets. In the day ahead, we have a data –dry macro calendar except for key risk event in form of the ECB decision, which is likely to turn out net-EUR positive. This could pressure the greenback against the common currency and hence triggered broad based US dollar weakness, benefiting the dollar-denominated precious metal. Markets are widely expecting the ECB to remain in a wait-and-see mode today, still assessing the impact of its Dec 3 decision to cut deposit rate in wake of the recent decline in oil prices and global markets volatility.
Technicals – On its way to test 2016 high at 1113.15
The hourly chart looks more attractive for gold bulls, with 100-SMA crossing the 200 one from below, while the prices continue to hold above the strong support near $ 1101 levels – the confluence of 5, 10 & 20-SMA. The RSI at 64.85, has turned higher and also back the case for more upmoves.
While when we see the daily charts, it can be clearly seen that the prices are facing strong hurdle at 100-DMA now at 1105.38, a break through the last will open doors for a retest of previous highs at 1109.70. Hence, only a close above 100-DMA will confirm further upside potential, with $ 1115-1125 levels on sight. While to the downside, 1093.60-1092.60 (intersection of 5 & 10-DMA) holds the key support, below which 1087.84 (Jan 20 Low) could be tested and from there to upward sloping 20-DMA placed at 1083.80.
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