- Opened positions for Gold remain positive with a confident majority of bullish trades (69% bullish / 31% bearish)
- It is possible that Gold will grow in price further, with the closest resistance for it located at 1,283
- At the same time, the probability of a downside movement exists as well, while for that purpose the closest support is placed at 1,274
- Upcoming events on January 28: US Crude Oil Inventories (Jan 23), FOMC Federal Funds Rate and FOMC Statement, Germany GfK Consumer Climate (Jan), Australia CPI (Q4), Bank of England Governor Mark Carney Speech, Reserve Bank of New Zealand Official Cash Rate, New Zealand Trade Balance (Dec)
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Profit-taking pushed the precious metal further away from the highest level in five months. Gold's safe-haven appeal faded amid rising equity markets and strong US Dollar, which rose to an 11-year high against a basket of major counterparts. Even news on central banks' gold purchases and inflows into the SPDR Gold Trust, the world's top gold-backed exchange-traded fund, failed to support bullion. Holdings in the SPDR Gold Trust increased 0.24% to 743.44 tonnes on Monday. Investors will be watching closely the Fed's FOMC meeting that starts today for any hints on monetary policy normalization and the timing of interest rate hike.
Meanwhile, US Congressional Budget Office expects that the budget deficit of the world's number one economy will shrink for a fifth consecutive year in 2016, marking the longest stretch of improvement since the surpluses of the late 1990s, as declining unemployment rate helps boost revenues. The fiscal shortfall will fall to $468 billion this year, or 2.6% of the nation's gross domestic product.
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US, New Zealand official central bank rates to be announced tomorrow
On Wednesday of this week, two big central banks are preparing to make a scheduled decision on main interest rates. First is the Fed which is assumed to keep rates unchanged, even despite hawkish projections among some economists. The second one is the Reserve Bank of New Zealand which is also unlikely to come up with surprises for the market. Among other central bankers, BoE Governor Mark Carney is giving a speech tomorrow in Dublin, Ireland.Read More: Fundamental Analysis
XAU/USD keeps medium-term bullish momentum
The XAU/USD cross has breached the most important resistance line on January 3, which is represented by the long-term downtrend at $1,218. Consequently, it started to develop above this level to hit $1,300 mark already on January 21. At the moment, it seems unlikely for gold to be able to return back below $1,200 in the foreseeable future. Moreover, if the bullion consolidates well above $1,250, then we may see metal's further increase in the medium-term. Nevertheless, the long-term outlook for the yellow metal tends to remain negative, mostly reflecting strength of US fundamental factors and gradual recovery in Europe. Therefore, in towards the end of Q1 2015 gold is still suggested to lose value.Daily chart
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On the first day of this week the precious metal lost around $15 per ounce and crossed a number of major demand areas during trading. At first, a support in face of weekly PP and 61.8% Fibonacci retracement was eliminated. The same happened with the monthly R2 at $1,283; therefore, gold managed to close at $1,281 in the night between Monday and Tuesday. If the bearish pressure persists in the near term, a violation of weekly S1/down-trend around $1,273 seems more than possible. In case of success, a decline may even extend down to 38.2% retracement.
Hourly chart
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Read More: Technical Analysis
Bullish majority on Gold extends further
Spreads (avg,pip) / Trading volume / Volatility
Traders, who were asked regarding their longer-term views on XAU/USD between Dec 27 and Jan 27 expect, on average, to see Gold trading just above 1,300 by the end of April. At the same time, 53% of them believe the bullion will be strongly above this mark in three months, while 33% of traders surveyed forecast the bullion to trade in the range between 1,150 and 1,300.
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