· Gold In Strong Start to Week on Biden Stimulus Push
Gold prices rise as dollar falls
Gold gained on Tuesday, a near one-week high as the dollar declined and markets remain optimistic for US fiscal stimulus reviving the economy.
Spot gold rose 0.5% to $1,839.02 per ounce by 05:36 GMT, having hit $1,843.04 earlier in the session, while US gold futures climbed by 0.5% to $1,842.60.
Micheal Langford, director at corporate advisory AirGuide said, "the main driver for gold is the confidence around US President Joe Biden's relief bill and the expectation of a further weakening of the US dollar which will come as a result of the aid."
The dollar declined against a basket of currencies, making gold cheaper for those with other currencies.
Gold serves as a shield against inflation and currency debasement due to stimulus injected into the economy.
According to IIya Spivak, currency strategist at DailyFX, higher inflation data along with vaccine adoption and easing lockdowns can nudge the Treasury yields higher and weigh on gold.
Higher yields increase the opportunity cost of holding non-yielding bullion.
· “Gold almost had its back broken, but the reflation trade just saved it,” said Ed Moya, senior market strategist for OANDA in New York. “Gold is rallying from a two-month low as Biden’s massive $1.9 trillion plan is about to become a reality.”
“The economic recovery is weak, and prospects are growing that more will be done once we get past this first $1.9 trillion plan. The reflation trade is happening a lot faster than-expected and that should keep inflation expectations rising.”
But Moya also cautioned that the yellow metal’s technical standing was still weak, and needed to push higher in order to not break down again.
“Gold is not out of the woods just yet and needs to capture the $1,850 level before the end of the week, otherwise a death-cross formation could trigger a significant wave of selling pressure.”
Gold’s test could really come later in the week, particularly on Wednesday, when Federal Reserve Chair Jay Powell speaks about the labor market at a webinar hosted by the Economic Club of New York.
Wednesday will be a packed day for gold. Market watchers will be paying close attention to the U.S. Consumer Price Index data for January, amid growing expectations that an uptick in inflation could be larger and longer lasting than the Fed is anticipating.
U.S. Treasury investors are betting on inflation to rise if the economy continues to progress in the second half of this year, after contracting in 2020 at its deepest pace since World War II. The prospect of a new coronavirus relief package is adding to inflation expectations.
Also due on Wednesday is the U.S. Federal Budget Balance and wholesale inventories data. On Thursday, initial jobless claims numbers will be published.
· Gold Price Futures (GC) Technical Analysis – Sustained Breakout Over $1831.80 Targets $1875.70 – $1878.90
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart. A trade through $1784.60 will reaffirm the downtrend. The main trend will change to up on a move through $1878.90.
The major support is a long-term retracement zone at $1787.30 to $1711.70. This zone stopped the selling on November 30 at $1771.30 and on February 4 at $1784.60.
The short-term range is $1878.90 to $1784.60. The market is currently straddling its 50% level at $1831.80.
The intermediate range is $1966.80 to $1784.60. Its retracement zone at $1875.70 to $1897.20 is potential resistance.
The main range is $2107.60 to $1771.30. Its retracement zone at $1939.50 to $1979.10 stopped the rally at $1966.80 on January 6.
· Silver, gold seen sustaining performance for 3-5 more years
Precious metals such as silver and gold may continue to perform well for another 3 to 5 years as investors flock to safe haven assets during the pandemic, a dealer said Tuesday.
Brian Lan, managing director of Goldsilver Central, said the pandemic led to a surge in demand, with silver prices rising 48 percent since last year, outpacing gold's 25-percent gain.
COVID related delays slowed production and supply, also contributing to the spikes in prices and premiums of holding an actual silver and gold bar, Lan said.
Reference: FXEmpire, ABS CBN NEWS, Gulf Today, Investing
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