Overview:- By analyzing the daily technical chart we can see that pair is trading and moving in an uptrend and in an uptrend market the corrections are considered as buying opportunity. Well the picture depicts us that the correction is over now and it’s time to buy the gold once again. It’s an alternative opportunity to buy for those who have missed earlier. The short term to intermediate term trend is up and in an uptrend market always buy on dips will be profitable strategy.
The last week was a highly volatile week as we can see that initially bulls take the charge and took the price at $1611 level which was a psychological level and everyone has opened their long position. No one has anticipated that gold will reverse from these levels so badly and on the same day it reversed back and closed to $1554 level which engulfed too many stop losses of long positions. Well on the next day also we have seen bearish momentum and it tested the $1540 level where 9 EMA line is lying and after retesting the EMA line it managed and sustained above $1550 level once again.
Fundamental Analysis:- . In economic data Thursday, China’s consumer price inflation came in at 4.5% year-on-year in December, unchanged from previous month’s reading but missing market forecast of 4.7%.The Nonfarm payrolls showed the economy added145k jobs in December, missing the expected print of 164k additions by a big margin. The last week began on a positive note with prices rising to $1,587 on Monday and extending gains to a 6.5-year high of $1,611 during Wednesday’s Asian trading hours on escalating US-Iran tensions.
Iran launched a retaliatory attack on the American bases in Iraq, raising prospects of a full-blown US-Iran military conflict, sending risk assets lower and safe havens higher. Tensions, however, eased on the same day with reports stating zero US casualties in Iran attack and Tehran promising peace if there is no fresh retaliatory response from the US. President Trump announced fresh economic sanctions on Iran but refrained from taking military action. As a result, gold ended on a negative note and fell to $1540 level before recovering to level $1556 level today, possibly on the back of a weaker-than-expected US jobs report.
More importantly, the average hourly earnings rose by just 2.9% year-on-year in December compared to the 3.1% projection. With wage growth falling below 3% for the first time since July 2018, disinflation concerns may grip markets, leading to a decline in treasury yields and the US dollar – gold’s biggest nemesis. At press time, the 10-year is seen at 1.825% and could slip to 1.74% next week. Meanwhile, the dollar index, which tracks the value of the greenback against majors, is seen at 97.37.
The main eyes will be on the upcoming data in this week where the US will release the Consumer Price Index, Producer Price Index, Retail Sales, Industrial Production and Housing data for the month of December. Weaker-than-expected inflation and Retail Sales numbers will likely accentuate disinflation fears, adding to the bearish tone around the US dollar. China’s trade Balance, Industrial Production and Retail Sales are scheduled for release along with the four-quarter GDP.
Technical Analysis: – From technical prospective we can see that a rounding bottom pattern has been completed easily and first phase of bull run is over now. Now it’s time to focus on the second run of Bull Run where $1700 level is the potential target. The MACD lines are providing us bullish signal line and RSI is also trading above 70, so some correction can’t be ruled out but that should be considered as buying opportunity. Both the indicators are generating bullish signal. Moreover, gold is getting moment just because of fundamental news.
The $1500 level is psychological level for bulls. Presently pair is trading between the moving average lines. Overall gold is trading in uptrend so we would suggest to buy on dips short term point of view. Odds are in favor of bulls and we will keep our bias bullish on the gold as long as $1500 level remains intact. The $1500 is the key support level followed by $1470 level whereas $1600 is key resistance level followed by $1640 level.
Trade idea:- Based on the chart and study above we are expecting that go for long at current levels 1550-1540 level for the target of $1600 and $1640 level with the tight stop loss of $1500 level.
