Investor focus still currently geared towards selling the rallies in Gold

With the US Federal Reserve having finally carried out their repeated pledge to raise US interest rates at the end of last year, there are going to be questions asked whether 2016 could see a return in Gold valuation following its third year of consecutive losses.Optimism over a possible recovery for Gold is being helped by a sequence of increased geo-political concerns around the globe.However, we still view geo-political tensions as a background risk for investors to monitor and it is important to highlightthat despite different geo-political tensions being ongoing for quite some time, that there has been no significant bounces in the valuation of the metal so far.

What investors will be watching out for when taking into account their opinions on Gold is if the precious metal restores some of its safe-haven appeal during 2016. Many were left stunned that despite the high uncertainties seen in the financial markets last year with this including: increased geo-political tensions, intense concerns over the China economic downturn and the extreme uncertainty in Greece, that Gold suffered from very low buying interest and it was only the shock from the Swiss National Bank (SNB) in early 2015 that increased safe-haven appetite. Looking at the recent bounce in early January following the global equity sell-off there is some potential for an improvement in safe-haven appeal, but public confidence inthe Federal Reserve that it intends to raise interest rates on around another four occasions this year is going to repeatedly limit to what extent Gold can recover losses. We now see the area just above $1110 as major resistance and until we close above this level, the investor focus will still be geared towards selling the rallies rather than buying the dips.

In reality, the intentions of the Federal Reserve still hold the key behind Gold trading. While there is evidence of US economic momentum slowing down, job creation remains as the star performer of the US economy and consistent performances in the jobs market will increase confidence that the Federal Reserve will continue to move forward with their intentions to further increase US interest rates. This is disappointing news for anyone expecting a significant correction in the price of Gold, and will basically limit the potential of any meaningful correction occurring at all. Another impressive NFP report to begin the year from the United States is going to raise expectations that there will be another US interest rate increase around the time thatQ1 comes to an end.

Bearing in mind how hesitant and resistant the Federal Reserve wastowards raising interest rates just once in 2015, we believe that the public declaration of an intention to raise interest rates another four times in 2016 will be questioned later in the year. However this is something for investors to consider in Q2 and likely towards the second half of the year, and for now Gold will still face pressure as expectations increase that the Fed will move once more in the coming months.

Looking at the technicals, we can see on all the daily, weekly and monthly charts that prices have found resistance at $1110 and a break below the 20 Simple Moving Average (SMA) on the daily timeframe should signal the potential for a further decline. If prices manage to break below $1075, sellers might find additional encouragement to send prices towards $1060. The weekly timeframe also shows that the sellers are still in control with consistent lower lows and lower highs taking place. Prices once again seem to have found firm resistance around $1110 while also trading below the 50,100 and 200 SMA’s. A weekly close below $1060 might be the encouragement sellers are waiting for before potentially looking for a further decline towards $1000, while the technical pattern taking place on the monthly chart does suggest that there is some further movement for Gold to move to the downside.

Gold Daily Chart:

Gold Weekly Chart:

Gold Monthly Chart: