XAU/USD (gold price in terms of USD) halted its corrective slide near $ 1185 region on Tuesday and resumed the bullish run towards 1200 barrier, only to find fresh offers at 1198.95 in the late US session and ended the day in the red at 1189.25. Gold’s rally lacked momentum as the US jobs openings bettered expectations, while markets remained on the back foot ahead of Fed Chair Yellen’s testimony on Wednesday and Thursday. While the downside remained capped on the back of growing Fed rate hike uncertainties and on increased flight to safety amid crashing global equities and oil prices. While broad based US dollar selling also kept the prices underpinned.
As for today’s trade so far, the yellow metal continues to move back and forth within yesterday’s trading, with risk remaining to the upside on the back of falling Fed rate hike expectations this year amid ongoing global market turmoil and an era of negative interest rates globally. The CME FedWatch tool shows chances of a rate hike by the Fed in March at 0%, while April chances are 2%, with May at 5%, and 20% before year-end. However, in the day ahead, all eyes will remain on the Fed Chair Yellen’s testimony on the Semi-annual Monetary Policy Report before the House Financial Services Committee, in Washington. Markets await some clarity on the Fed’s rate hike prospects and in case of dovish comments by the Fed chief, we could see a renewed USD sell-off across the board that would provide much need impetus to the gold prices.
Technicals – A daily close above 1200 levels will open up further upside
On daily charts, the prices once again failed near 1200 barrier and retreated to test previous lows near 1185 levels. The bullion found support near 1187 region and swung back higher to now hover around $ 1189 levels. The prices form a small doji candlestick, with the daily RSI turning flat near 78 levels, both indicating a lack of clear direction for gold. Hence, Yellen’s testimony would lead the way for the precious metal. Its widely expected that the Fed head would sound more dovish in wake of the recent financial markets turmoil, which would benefit gold. Hence, to the upside, the yellow metal could revert to 1200 barrier and beyond. On the flip side, any less dovish surprise would trigger a sharp drop in the prices as the metal remains near overbought levels and requires a trigger for the correction after the recent strength. Gold finds the immediate support at 1183-80 region (late-Oct levels), below which the prices could accelerate to the upward sloping hourly 100-SMA support locate near at 1173-1174 where Friday’s high coincides.
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