Gold vs. US dollar; No yield vs. 116

Currently, the Gold spot is trading at 1249.92, up +1.00% or 1245-pips on the day, having posted a daily high at 1251.10 and low at 1237.79. On the other hand, the US 10yr treasury yields have traded from 2.41% to 2.37%, down -1.25% on the day at 2.38% or -0.0302.

Gold bugs are on banking a 2-day winning streak as the shiny metal moves higher and closer to a significant resistance level near 200-DMA level where market sources indicate a profit-taking should be triggered. 

Yield from Gold - Not on Gold

As reported on the wires, via Bloomberg, "Investors seeking refuge from political uncertainty in the U.S. and Europe have piled into gold in recent weeks, its appeal further buoyed by a perception that the Federal Reserve would be slow to raise borrowing costs. Betting on miners has the advantage of giving exposure to dividends, and going for a leveraged security amplifies the returns in a rallying market."

As usual, astute traders and investors look to diversify their portfolios through up to date financial instruments; "Direxion Daily Junior Gold Miners Index Bull 3x Shares almost tripled in the past two months," concluded the report on Bloomberg.

Market throws back in Fed's face a fairly good clue about next rate hike

Historical data available for traders and investors indicates during the last 8-weeks that Gold spot had the best trading day at +1.41% (Jan.5) or 1664-pips, and the worst at -1.11% (Jan.18) or (1331)-pips.

Technical levels to watch

In terms of technical levels, upside barriers are aligned at $1262 (200-DMA), then at 1290 (high Nov.10) and above that at $1330 (high Nov.9). While supports are aligned at $1210 (100-DMA), later at $1190 (50-DMA) and below that at $1140 (low Jan.3). On the other hand, Stochastic Oscillator (5,3,3) seems to slightly change direction to head north. Therefore, there is evidence to expect more Gold gains in the near term.

The greenback – gauged by the US Dollar Index seems muted 'at 50-DMA gates' which contributed to a sell-off across the board (this represents the 3rd attempt during the last 6 trading sessions). However, the bullish tone hasn't been diluted as long as the buck holds 100.20 handle. Now, there is technical evidence to expect either a break above 101.60 or sell-off towards the 100-DMA near 100.20.

In term of technical levels, upside barriers are aligned at 101.40 (high Feb.23), then at 102.10 (high Jan.16) and above that at 102.40 (high Jan.9). Meanwhile, supports are aligned at 100.20 (100-DMA), later at 99.60 (low Feb.6) and finally below that at 98.54 (low No.11).

On the long-term view, economists have weighed the different scenarios that the greenback could experience as Trump's Agenda evolves. However, one particular view shared at Brown Brothers Harriman is intriguing and should push traders and investors to adjust portfolio positions in the long-term; the Dollar Index (DXY) moving as high as 120 - but how?

There is evidence to call for a deeper buck correction at least in the next 8-months as any 'tax cut' or infrastructure spending materialize in the US economy would not impact data figures immediately, then a move lower towards 93 (long-term 61.8% Fib) should not be ruled out from this level - border tax or tax cuts could disrupt the US economy and boost the dollar index at least 25% which translates 93 * 0.25 = 23.25 + 93 = 116 initially; the several variables the team at BBH reviewed are indeed valid, however, basic arithmetic provides a somewhat doable long-term target when the dust and Trump initiatives settle.

Market wrap: mixed day with weaker dollar, higher stocks - Westpac