Overview:- During the last week we have seen a uptick in the gold where bulls have shown a massive bullish attack as resulted a bullish candlestick on the weekly chart. The way bulls are reacting it seems like they are trying to retest the recent high of $1611. Yellow metal is posting weekly gain despite the uptick in the US dollar. Gold is looking strong and could rise to the psychological resistance of $1600 in the this week or next. The yellow metal began the year on a positive note, rising as high as $1611 on Jan. 8 on US-Iran tensions. The bid tone, however, weakened as tensions subsided and prices fell back to $1535 by Jan. 14. Since then, the yellow metal has silently regained poise by rising back to highs above $1580.
Fundamental Analysis: – What’s particularly noteworthy is that both gold and US dollar are reported a weekly gain. The dollar index, which tracks the value of the greenback, has ended higher for the third straight week. Investors usually pull out money from the gold market during bouts of dollar strength. This time, however, gold has turned a blind eye toward the rise in the greenback. The price action is indicative of the underlying bullish sentiment in the gold market.
Also, The Fed is widely expected to maintain the status quo on rates and reiterate December’s message that sustained above-target inflation is a prerequisite for rate hikes. That would only bolster the bullish pressures around.
The bullish case, however, would weaken if key US data – Durable Goods Orders, Personal Spending and fourth-quarter GDP growth rate – beat estimates by a big margin, pushing stocks and other risk assets higher.
Technical Analysis: – From technical prospective we can see that Gold has established a higher low at $1535 with a rounding bottom-like pattern and looks set to challenge $1611. On hourly chart a bullish flag pattern can’t be ignored at this moment which is pushing us to keep our view bullish on the gold as long as $1540 level remains intact.
The yellow gold is trading and sustaining above all the major and minor EMA lines and providing us bullish signal for the time being. The current set up also suggest us that bulls are holding the grip with their hand and they are not in a mood to lose the grip for the being.
The 14-day relative strength index (RSI) seems to have regained upward trajectory and the a bullish crossover on the MACD indicator is the recent development on the daily chart which is pushing us to have bullish view on the gold. The bullish view would be aborted if prices print a weekly close under the $1535 previous cyclic low. The short term to intermediate term trend is up so in an uptrend market always buy on dips will be profitable strategy. .
On daily chart bulls have give us valid breakout of the very short term narrow range which suggest us that bulls have won the tug of war and for the time being bulls are driving the car and traders are advised to sit in the car to enjoy the rally. Odds are in favor of bulls and daily to weekly bias remains bearish on gold as long as $1535 level remains intact. The way gold is trading and moving on the daily chart it seems like $1600 and $1611 level is unfinished target of bulls.
What next:- The bulls are dominating the bears, leading in the game and playing at front foot and it seems that bulls are going to continue with this game and will dominate the bears in near term with full of pace and they are approaching the at $1611 level in coming weeks. On contrary A daily closing below $1550 level will open the way towards the $1530 and $1510 level. The $1600 is make or break level can be considered as key resistance level followed by $1640 where $1535 is a key support level followed by $1500 level.
Trade idea:- Based on the chart and study above we would suggest that positional traders may go for buy at current levels i.e. $1578-75 for target of $1600 and $1610 level with strict stop loss of $1550 level.
