As anticipated, XAU/USD (gold prices in terms of the US dollar) consolidated to the downside on Monday, although remained in a slim range above 5-DMA then at 1087.13, as low volumes and a lack of economic news on account of Martin Luther King holiday failed to provide fresh impetus to the bullion. While traders remained on the back foot ahead of Tuesday’s Chinese data-deluge, which could have major impact on the gold prices. China is the world’s second largest consumer of gold.
In today’s trade so far, gold keeps its range-play intact and oscillates back and forth in a $ 5 tight range. The yellow metal reversed a brief dip to lows at 1085.45 post-China GDP release and rose sharply to 1090.76 session highs as the Chinese Q4 GDP data missed estimates and fell 6.8% versus 6.9% previous. While China’s retail sales and industrial production data also disappointed markets. However, the prices failed to sustain at higher levels and turned lower as the Asian equities swung back higher and lifted overall market sentiment, and thus, weighed on gold’s safe-haven appeal. The Chinese benchmark index closed +3.22%.
Moreover, the upcoming CPI and ZEW data from the Euro zone and Germany are expected to put up a poor show, which will negatively impact the EUR/USD pair and drive the USD higher across the board. A stronger greenback makes gold expensive for holders in foreign currencies and hence, lowers the demand for the bullion. However, the US CPI report due tomorrow is expected to emerge the main driver for gold this week and gold traders eagerly await the inflation figures.
Technicals – Rising wedge pattern target at 1080-1075 still holds
On hourly charts, the pattern target for rising wedge bearish break, predicted the day earlier still remains in place and is likely to be achieved in the near-term. On daily charts, the prices have formed a small doji and remains capped between Fib 38.20% and Fib 50.0% retracement of the 2016 rise, which lie at 1091.65 and 1085.11 respectively. The RSI remains flat and holds just above the mid-lines further suggesting a lack of clear direction for now.
However, as explained above the move to the downside seems more likely and hence the immediate support is near 1085 region, a break below which floors open up for a test of 20-DMA at 1081.11 and from there to 1078.56/ 1075.47 levels (Fib 61.80% of the same rally and 50-DMA horizontal support). In case of a failure to breach 1085 support, the prices may rebound higher towards Fib 38.20% level at 1091.65, beyond which the immediate barrier would be faced at hourly 200-SMA placed at 1092.90, above which $ 1100 mark will hold the key, a breach of which will open further upside.
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