XAU/USD (gold price in terms of USD) fell sharply on Friday and booked second straight weekly loss, falling as low as 1211.41, before recovering some ground to end the week at 1224.22. The prices fell almost $ 30 intraday as the greenback jumped to fresh three-week highs against its major peers after the US Q4 GDP estimate surprised markets to the upside, growing at 1.0% versus a 0.4% rise expected. The latest US growth numbers added to the recent upbeat US factory and capital goods data, suggesting that the US economy is back on track and that Fed may very well hike rates further this year. The bullion managed to hold on to the 10-DMA support then located at 1219.24.
As for today’s trade, the gold prices stage a solid rebound and extend its bullish momentum into Europe, with the persisting risk-off market profile bolstering gold’s safe-haven appeal. The Chinese stocks slump triggered fresh selling spiral across Asia and now weighs down on the European markets as well. While the greenback trades largely subdued across the board as markets book profit on their USD longs after the recent upsurge. Hence, the yellow metal benefits as a weaker USD makes gold cheaper for holders in other currencies. In the day ahead, the risk-off/on sentiment will continue to drive the sentiment around the gold prices amid a lack of significant US economic data. From the US docket, we have the regional PMI index and the pending home sales data lined up for release later in the NY session. While the Chinese manufacturing PMI reports due tomorrow will be also closely watched for fresh cues.
Technicals – Bullish potential intact, a daily closing above 1hr 50-SMA key
The technicals continue to paint a bullish picture for gold, with the golden crossover on the daily chart confirming further upside ahead. While on the hourly chart, the prices displayed a falling wedge bullish breakout at 1231.27, where the 50-SMA resistance coincides. The prices now hover above 1230 levels, clinging onto the 100-SMA support placed at 1229.74. A break of the last, the prices could drop further to 1224 region, the confluence of downward sloping 20-SMA and 10-DMA. The bulls may find fresh bids near the last and swung back higher to resume its recent upside momentum. To the topside, the next resistance is seen at 1233.13 – daily highs, beyond which 1240-45 levels will come into the picture. A decisive break beyond the last would bring the yearly highs near 1260 back on sight.
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