Gold prices rose 1% in technical trading on Tuesday to a six-month high. However, investors are looking forward to the minutes of the Fed’s latest policy meeting for more clues on the rate hike path. Analysts interpret the market and evaluate the technical outlook of gold.
“Uptrend appears to be technical buy-in as opposed to driven”
In weak trades, spot gold retreated after hitting $1,849 during the day. At the time of writing, it was trading at $1,833, up 0.58%. U.S. gold futures rose 0.7% to $1,839. City Index senior market analyst Matt Simpson comments:
We see a slight bid for gold and the $1,830 level is acting a bit like a magnet. But since liquidity is so low at this time of year, it basically looks like a technical buy as opposed to guided.
Meanwhile, cryptocoin.com As we have reported, the minutes of the Fed’s December policy meeting will be released on Wednesday. The Fed increased rates by 50 bps after four consecutive increases of 75 bps each in December. Simpson comments on the minutes as follows:
I doubt the minutes will be as effective as the Fed’s December meeting. However, traders will look for confirmation of the lower Fed rate, expressed in the median dot chart, which could support gold.
“Spot gold may rise to $1,861-1,869 range”
Gold is considered a hedge against inflation and economic uncertainties. However, higher interest rates increase the opportunity cost of holding gold as it pays no interest. Market participants are also keeping a close eye on the rising coronavirus infections in China, the largest consumer of bullion. Also on the radar is the US December payroll data, due Friday, which is expected to show that the labor market remains firm.
On the technical front, spot gold could rise to the $1,861-$1,869 range, according to Reuters technical analyst Wang Tao.
“A fix for gold may be in the cards”
Market analysts continue to argue that the Fed may start lowering interest rates again next year. In this environment, gold rallied this week as the weakening US dollar supported precious metal prices. Oanda’s senior market analyst Craig Erlam says in a note that gold has risen but is struggling to gain momentum. In this context, the analyst underlines the following:
The outlook for the yellow metal may still look very positive as central banks are definitely approaching peak interest rates and the economic outlook is rather bleak. But in the near term, a correction may be on the cards in the absence of another bullish catalyst.
Gold market technical analysis
Technical analyst Christopher Lewis makes the following analysis regarding the technical outlook of gold. Gold markets were closed in the futures pits on Monday. However, it looks like we will see more of the same compared to CFD markets. We’re just fluctuating at the $1,825 level and of course we’re stuck in the same channel we were in before. The 50-Day EMA is trying to bounce back and surpass the 200-Day EMA. That’s why I think at this point in time, the “golden cross” could have thrown people into this market as well. Frankly, if we pull back a bit, then it makes quite a lot of sense for us to see buyers jumping into the market to show signs of life.
On the other hand, a move above the $1,850 level could open the possibility of a move to the $1,875 level. An upside break of the $1,875 level could start a move towards the $2,000 level. The market will continue to support wealth protection, which could spark the idea of gold going higher. If we go down from here, I think there should be a lot of buyers, at least up to the moving averages. Anything below it could shock the markets to the $1,700 level. However, I don’t expect that to happen anytime soon.
However, keep in mind that the markets will be pretty weak in volume, at least until we get the jobs report on Friday, maybe even next week. Ultimately, I believe the market needs to find where we are going for a bigger move. So I think it’s a situation where you are ultimately looking for value and trying to capitalize on it.
