Gold bulls in control, eye $1,340 key upside target

The US dollar has struggled in an environment whereby US stocks have been beaten up at the start of a critical week in earnings, economic data and geopolitical events. In this respect, gold bulls are getting the benefit of not only risk off markets, but a weaker dollar and heavy US yields as well following the sell-off on Wall Street lead by news in the DJIA component, Caterpillar that reported disappointing earnings results, citing China's slowing economy and higher material and transpiration costs. The DXY has moved to the bottom of the hourly Bollinger band where it meets support in 95.69/70s. The benchmark 10-year yield has also fallen from 2.7670% to 2.7350%. 

"Global markets will face a busy few sessions ahead, with US-China trade and FOMC meetings holding the spotlight, while an eventful week for earnings season will also help to set the tone for risk assets as some of the all-important tech stocks report. And, traders will likely digest caterpillar's dim 2019 outlook as they reassess their demand outlook," analysts at TD Securities explained. 

Gold and the Fed

In precious metals, the focus will likely be on the FOMC's guidance:

"Money managers will be looking for some insights as to the Fed's estimates for the terminal value of their balance sheet. While gold prices moved above the $1,300/oz range, we maintain our cautious tone on the yellow metal ahead of Powell's press conference, as we suspect the market may be setting itself up for a disappointment given its optimistic expectations," the analysts at TD Securities warned. 

Gold levels

Gold left a long bullish Marubozu Japanese candlestick on Friday, extending its ascent from the mid-Aug 2018 lows and on Monday, sellers have been beaten with that long downside shadow and higher high. 1269 is the 23.6% Fibo retracement of the entire movement which could be the bearish downside target in the interim should there be a correction. However, 1340 comes as the next key resistance level for the bulls. MACD is positive, and RSI has room to go into overbought territory.