XAU/USD (gold in terms of USD) finished in the red on Thursday, reversing three-back-to back session of gains, mainly on the back of a technical correction after the prices had formed three white soldiers candlestick pattern on the daily charts. The prices dropped sharply to 1111.50, before recovering to close the day at 1114.21, below the Fib 23.60% retracement of the latest rally to near three-month highs. A slew disappointing US macro releases viz., durable, core durable goods data and pending home sales figures also failed to boost the safe-haven bids for the bullion, as the sentiment got more optimistic on the back of rebounding oil prices. While the less dovish Fed decision also continued to weigh on the non-interest bearing yellow metal.
As for today’s trade so far, the precious metal recovered from lows, although the recovery lacks follow-through as the prices remain unperturbed by the additional easing measures announced by the BOJ at its policy meeting earlier today, BOJ surprised markets by adopting the negative interest rate policy while keeping the QQE program intact. Looking ahead, gold is expected to continue its range-play between 1105-1125 levels, although the risk remains slightly tiled to the downside amid the risk-on rally in the global equities spurred by the oil price rebound and the latest BOJ unexpected rate cut decision. However, the bulls may be offered some support if the US GDP sees a bigger than expected drop and thus, weighs on the Fed rate hike bets. Final GDP for Q4 posted a strong gain of 2.0% in Q4, just above the estimate of 1.9%. Advance GDP for Q1 is expected to come in much softer, with a forecast of 0.8%.
Technicals – Worse than expected advance GDP data could push gold towards Thursday’s high
On the daily charts, the prices have formed a spinning top candle, with the daily RSI turning flatter at 60, suggesting that uncertainty seems to be arising on the ongoing downward momentum. Hence, we could see prices reverse on worse than expected US GDP data, with the prices finding immediate resistance at daily highs of 1118.29, beyond which doors would open for a test of previous highs posted at 1124.89. While if the data turns out be net-USD positive, we could see gold prices dropping further to test the major support placed at 1106-1105 levels, the confluence of 100-DMA and the Fib 38.20% retracement of the same rally. Selling pressure will intensify below a break of the last drowning prices to $ 1100 – psychological barrier.
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