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Technical Analysis

GOLD Analysis – January 17, 2022

Gold’s Daily Price Analysis

Throughout Monday’s Asian trading session, the precious metal price extended its early-day winning streak and received some more bids around $1,820 on risk-off market sentiment that tends to support safe-haven assets like gold. However, concerns about the coronavirus and a Fed rate hike weighed on the market’s pessimistic outlook.

The S&P 500 futures declined 0.20 percent intraday as bond moves were restrained in the United States owing to a bank holiday. It’s worth noting that US 10-year interest rates rose 8.4 basis points (bps) on Friday, breaking a four-day downward trend and ending at 1.793 percent. The gold price, XAU/USD, is trading near Friday’s close on Monday’s open. Markets reacted defensively to disappointing US GDP data for December, weighing on Asian shares.

Meanwhile, the US dollar fell in Asia on Monday after the People’s Bank of China (PBOC) unexpectedly cut its benchmark interest rate. The US dollar’s losses were exacerbated by previously revealed weak US statistics, which has a negative impact on the US economy and adds to currency losses. As a result, a weaker US dollar was regarded as one of the major causes driving XAU/USD prices upward.

The safe-haven metal is currently trading at 1,819.07 and stabilizing in the band of 1,813.20 – 1,820.28. Moving on, the absence of important data/events from the United States for the day prompts investors to focus on China’s GDP and other critical indicators for immediate direction.

Despite the lack of noteworthy data/events from the United States for the day, the market’s trading mood failed to reverse its bad overnight performance and remained in the red for the day. However, the coronavirus and the Fed rate move affected the market’s trading attitude. After experiencing more than 20,000 daily infections for the third day in a row, China’s Beijing tightens entry limits, while Japan proposes increased virus-related restrictions for Tokyo.

On the other hand, Australia is witnessing its fourth consecutive day of easy daily COVID infections, with the latest tally estimated to be about 65,000. It’s worth mentioning that New South Wales (NSW), Australia’s most populous state, had the highest number of daily COVID-related deaths on Friday, with 29, which has since reduced to 17 cases. During his last week’s Senate Banking Committee hearing, Fed Chairman Jerome Powell claimed that the US economy is ready to begin tightening monetary policy.

Other Fed officials have stated that rates will almost certainly be hiked in March 2022. The Fed will make its next policy decision on January 25-26, while the Bank of England will decide on February 3. Concerns over the Fed’s rate hike increased after Federal Reserve Bank of San Francisco President Mary Daly and New York Fed President John Williams on Friday.

The XAU/USD price jumped due to mixed data, coronavirus fears, and buzz about faster Fed rate hikes, owing mostly to its risk barometer status. Furthermore, the market’s trading sentiment losses were bolstered further by December’s weak US economic statistics, which might greatly help the gold price if China disappoints in today’s numbers.

In terms of facts, retail sales in the United States declined 1.9 percent year on year, while sales in the control group fell 3.1 percent. According to ANZ Bank analysts, the numbers indicate that the highest inflation in 40 years influences consumer behaviour, which may easily extend into the first quarter when child tax benefits expire. As a result, manufacturing decreased by 0.3 percent year on year, while industrial production decreased by 0.1 percent.

Analysts at ANZ Bank believe that “a 1.3 percent decrease in auto vehicles and parts led manufacturing contraction.” As a result, S&P 500 futures dropped 0.20 percent intraday, while US 10-year Treasury futures dropped even more. As a result of the overall negative tone in the equities markets, safe-haven gold profited. Moving forward, the absence of critical data or events from the United States prompts investors to focus on China’s GDP and other critical indicators for immediate direction. Finally, virus updates and concerns about Fed rate hikes have emerged as the most crucial drivers.

GOLD Intraday Technical Level

Support Resistance
1812.11 1828.41
1803.83 1836.43
1795.81 1844.71
Pivot Point: 1820.13

GOLD – Technical Outlook

On Monday, gold is trading at $1,821, with a bullish bias, after breaching the resistance level of $1,815. This level serves as a support level for gold. Further to the upside, the next resistance level is at 1,832, and a break over this might push the gold price up to the 1,845 level. On the downside, support is still around 1,820, and a break below this level might extend the selling trend to the 1,804 level. All the best!