Gold prices hit a low of USD 1251.9/Oz this week after the latest federal Reserve statement did little to alter investor expectations about the timing of interest rate hike in the US. The statement also remained silent regarding the strength in the US dollar.
However, the weaker-than-expected US Q4 GDP data released today has pushed Gold prices back to USD 1270/Oz levels as I write.
Gold is expected to remain stuck in the range of USD 1260-1300 ahead of the NFP report. The gains are likely to be capped around USD 1300/Oz levels as:
1. Resilient USD - The US dollar continues to remain strong across the board, despite of a fall in the US treasury yields following a dismal GDP report. Moreover, the Fed statement did not comment on the surging USD. Hence, the USD index is likely to remain strong, although some amount of weakness is possible due to strength in the Yen and technical recovery in the Euro.
2. Caution ahead of NFP – The January Non-farm payrolls data is expected to show an addition of 233K, which is lower than the previous month’s print of 252K. However, the data has blown past expectations in the past two occasions. Hence, investors are likely to avoid taking big bets in the yellow metal ahead of the data.
On the other hand, the losses are likely to be capped around USD 1260 as:
1. Bond yields decline across the globe – The 30-year bond yield in the US, while the 10-year bond yield in Germany fell to record lows today. Earlier this week, the 10-year Gilt yield in the UK fell to record lows. Given the weak energy prices, a slowdown in global growth, including US, the Treasury yields are likely to remain weak. Thus Gold prices are likely to remain well supported
2. Central banks expected to ease – Aggressive interest rate cuts by most central bankers across Europe, Asia and Canada has led markets to anticipate similar moves from the remaining central bankers. Markets are now betting that the Reserve Bank of Australia is next in line to cut interest rates. On similar lines, the Bank of Canada may be expected to cut interest rates again after the weak GDP data released today.
3. Renewed tensions in Greece – The tensions between newly elected anti-austerity government and its international creditors may flare up anytime. Greece’s stock markets are collapsing, while the government bond yields hit record highs. Thus, markets are likely to favor Gold in the next week.
2. The metal has recovered from the low of 1251.9 to trade above the 50-WMA (1266) at 12763.9 levels.
3. On the upper side, a falling trend line resistance on weekly charts is likely to cap gains around 1302 levels.
4. Meanwhile, 5-WMA is likely to provide support around 1260.00 levels.
However, the weaker-than-expected US Q4 GDP data released today has pushed Gold prices back to USD 1270/Oz levels as I write.
Gold is expected to remain stuck in the range of USD 1260-1300 ahead of the NFP report. The gains are likely to be capped around USD 1300/Oz levels as:
1. Resilient USD - The US dollar continues to remain strong across the board, despite of a fall in the US treasury yields following a dismal GDP report. Moreover, the Fed statement did not comment on the surging USD. Hence, the USD index is likely to remain strong, although some amount of weakness is possible due to strength in the Yen and technical recovery in the Euro.
2. Caution ahead of NFP – The January Non-farm payrolls data is expected to show an addition of 233K, which is lower than the previous month’s print of 252K. However, the data has blown past expectations in the past two occasions. Hence, investors are likely to avoid taking big bets in the yellow metal ahead of the data.
On the other hand, the losses are likely to be capped around USD 1260 as:
1. Bond yields decline across the globe – The 30-year bond yield in the US, while the 10-year bond yield in Germany fell to record lows today. Earlier this week, the 10-year Gilt yield in the UK fell to record lows. Given the weak energy prices, a slowdown in global growth, including US, the Treasury yields are likely to remain weak. Thus Gold prices are likely to remain well supported
2. Central banks expected to ease – Aggressive interest rate cuts by most central bankers across Europe, Asia and Canada has led markets to anticipate similar moves from the remaining central bankers. Markets are now betting that the Reserve Bank of Australia is next in line to cut interest rates. On similar lines, the Bank of Canada may be expected to cut interest rates again after the weak GDP data released today.
3. Renewed tensions in Greece – The tensions between newly elected anti-austerity government and its international creditors may flare up anytime. Greece’s stock markets are collapsing, while the government bond yields hit record highs. Thus, markets are likely to favor Gold in the next week.
Technical Factors
1. On weekly charts, the metal witnessed a healthy correction after posting sharp gains in the previous three weeks. Prices tested the 100-WMA last week before falling this week to 50-WMA located at 1266 levels.2. The metal has recovered from the low of 1251.9 to trade above the 50-WMA (1266) at 12763.9 levels.
3. On the upper side, a falling trend line resistance on weekly charts is likely to cap gains around 1302 levels.
4. Meanwhile, 5-WMA is likely to provide support around 1260.00 levels.
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