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Gold inches up on weaker dollar, stimulus hopes

 

·         Gold prices edged up on Wednesday as the dollar hovered around a one-week low and expectations of a massive stimulus package in the United States lifted bullion’s appeal.

 

·         Spot gold rose 0.2% to $1,839.99 per ounce by 0210 GMT. U.S. gold futures gained 0.2% to $1,840.40.

 

·         The dollar fell to an over one-week low in the previous session. A weaker dollar makes commodities priced in the greenback more affordable for holders of other currencies.

 

·         U.S. President Joe Biden said on Tuesday he agreed with a proposal by Democratic lawmakers that would limit or phase out stimulus payments to higher-income individuals as part of his $1.9 trillion coronavirus relief bill.

 

·         U.S. layoffs eased in December and job openings increased modestly, suggesting the decline in employment was largely due to companies cutting back on hiring amid uncertainty caused by a raging COVID-19 pandemic.

 

·         Investors now await Federal Reserve Chairman Jerome Powell’s speech before a virtual Economic Club of New York event at 1900 GMT on Wednesday.

 

·         SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings fell 0.4% to 1,148.34 tonnes on Tuesday from 1,152.43 tonnes on Monday.

 

·         Gold Price Analysis: XAU/USD battles key upside hurdles below $1,850

 

Gold fails to extend the previous three-day bull-run while easing to $1,836, an intraday low of $1,834, during Wednesday’s Asian session.

 

Although the receding strength of the bearish MACD signals favors the gold buyers, multiple resistances restrict the metal’s around $1,840.

 

Among them, a downward sloping trend line from January 06, currently around $1,837 acts as the immediate upside barrier ahead of 61.8% Fibonacci retracement level of $1,839 and 21-day SMA near $1,841.

 

If at all the quote crosses the $1,841 hurdle, 50% Fibonacci retracement level surrounding $1,862 and the late January top close to $1,875-76 will be the key to watch.

 

On the flip side, sellers may eye the $1,800 round-figure during the fresh declines before targeting the monthly low of $1,792.

 

It should, however, be noted that the January low of $1,762 will lure the gold bears past-$1,762.

 

Overall, gold prices are nearing decisive resistances and hence warrant close attention.

 

Gold Price Chart: Key resistances and supports

 

The Technical Confluences Indicator shows that gold has recaptured the critical resistance at $1842, which is the confluence of the previous high four-hour, Fibonacci 61.8% one-week and Fibonacci 23.6% one-month.

 

Bulls would then extend their control to crack $1864, the meeting point of the Fibonacci 38.2% one-month and the SMA200 four-hour.

 

On its way north, the bulls are likely to face a bumpy road amid a dense cluster of resistance levels aligned around $1858/60 levels, the intersection of the SMA50 one-day and pivot point one-day R2.

 

The confluence of the SMA100 one-day and previous week high at $1872 could be the next upside target.

 

On the flip side, immediate support is seen at $1841, which is the convergence of the previous high four-hour and Fibonacci 23.6% one-month.

 

The next relevant cushion awaits at $1831, where the SMA50 one-hour coincides with the SMA50 four-hour.

 

Further south, the $1819 level could challenge the bears’ commitment. That level is the confluence of the Fibonacci 38.2% one-week and pivot point one-day S2.

 

The previous month low at $1803 could be the next downside target for the XAU sellers.

 

·         China’s Recovery Points to Lunar New Year Boost for Gold Demand

China’s economic recovery from the coronavirus pandemic may offer some solace to gold bulls, with expectations building that jewelry demand will rebound following last year’s wipe out.

 

Jewelry retailers on the mainland have reported strong sales in recent months, while concerns over infection have pushed some consumers online. It’s a turn around from last year’s Lunar New Year period, when surging virus cases forced stores to shorten business hours and manage time off for employees, and consumers reined in spending.

 

The shaky start to 2020 saw demand in the world’s biggest gold consumer tumble 35% to the lowest annual total since 2009, despite a rebound in the final three quarters. China’s Lunar New Year holiday, a traditionally auspicious time to buy gold, kicks off on Thursday.

 

Optimism about new year sales has improved considerably, said Nikos Kavalis, managing director at consultancy Metals Focus. He’s confident sales “will be higher year on year, given the low base in 2020 due to the pandemic.”

 

Still, consumption is unlikely to have returned to pre-pandemic levels. Demand may be about 30% lower than the same period in 2018 and 2019 due to the re-emergence of the virus in some provinces, said Haywood Cheung, president of the Chinese Gold & Silver Exchange in Hong Kong.

 

·         Barrick Gold Stock Drops 24% In 3 Months – Patient Investors Will Benefit

 

Barrick Gold stock (NYSE: GOLD) dropped 24% in the last 3 months and currently trades a little over $22. The decline in stock price was mainly driven by weakness in gold prices. After registering an impressive rise from $1,500/ounce in January 2020 to over $2,000/ounce in September 2020, gold prices have since then remained volatile and have, in fact, largely declined. The price currently stands at $1,822/ounce. Weakness in gold price was driven by gradual lifting of lockdowns, which led to expectations of faster economic recovery.

 

·         Spot silver gained 0.6% to $27.36 an ounce, palladium was down 0.3% to $2,312.58.

 

·         Platinum rose 2.1% to $1,200.03, after hitting $1,202.29 earlier in the session, its highest since February 2015, on supply deficit concerns.

 

Reference: CNBC, FXStreet, Nasdaq, Bloomberg