Gold prices rose on Tuesday, supported by a weaker US dollar and Treasury yields, as traders await December inflation data and weigh bets on a faster rate hike by the Federal Reserve. Analysts’ market comments and technical analysis Cryptocoin. com we have compiled it for its readers.
“Yellow metal could drop further if US inflation exceeds forecast”
Commenting on the developments in the markets, DailyFX strategist Margaret Yang comments that the decline in both the US dollar and 10-year treasury rates supports gold prices, but the markets are still seeing three to four rate hikes this year, limiting the upside potential.
Meanwhile, the yield on 10-year Treasuries fell to about 1,757% from a nearly two-year high of 1,808%. Gold is considered a hedge against high inflation, but the precious metal is highly susceptible to rising interest rates as it increases the opportunity cost of holding non-yielding bullion. Goldman Sachs now expects the Federal Reserve to raise interest rates four times this year, matching the view of analysts at JP Morgan and Deutsche Bank.
The dollar tumbled against a basket of currencies as traders looked to Fed Chairman Jerome Powell’s nomination hearing later in the day as traders sought new clues about the timing and pace of policy normalization. Margaret Yang evaluates the effect of the inflation figure on gold as follows:
Markets are forecasting a 5.4% annual increase in core inflation, and if the figures exceed this estimate, we could see the dollar rise even higher and gold prices fall. However, if inflation falls below expectations, it may provide some relief for gold.
“Trader and investor risk aversion has not been sharp earlier this week, but neither has their appetite for risk,” Jim Wyckoff, senior analyst at Kitco Metals, commented in a note.
Pablo Piovano: Gold now targets the $1,830 zone
Open interest on gold futures markets reversed the previous daily decline, with nearly 14.2K contracts up Monday, according to flash data from CME Group. However, the trading volume has shrunk by around 104.5k contracts for the first time ever this year.
According to market analyst Pablo Piovano, gold prices started the week in an optimistic mood amid rising open interest rates. However, he says more gains are likely in the very near term with the immediate target at the recent highs in the $1,830 region.
Important levels to watch for gold price
Technic Confluences Detector, used by market analyst Dhwani Mehta, shows that gold price is heading towards a dense cluster of healthy resistance levels around $1,807, where the one-hour SMA200, one-day SMA10 and the previous four-hour high coincide.
If the bullish momentum extends, gold price could challenge the one-day R2 pivot point at $1,809; Above this, the one-week Fibonacci 61.8% and the one-month Fibonacci 23.6% consolidation at $1,813 will come into play. Moreover, the analyst states that buyers will target the one-day R3 pivot point at $1,818. Dhwani Mehta points out the following levels in his technical analysis:
On the flip side, the immediate downside is capped at $1,803, the four-hour SMA100. The next relevant support is seen near $1,801-1800, the intersection of the one-day SMA200, one-hour SMA100, and the one-month Fibonacci 38.2%. Fibonacci 38.2% will come to the rescue of gold optimists one day after $ 1,798. The last line of defense for the bulls is at $1,794. At this level, the one-week Fibonacci 23.6% meets the four-hour SMA200.