Weekly Technical and Fundamental Analysis of Gold - February 11
The Consumer Price Index (CPI) report of the United States is the key driver for gold in the upcoming week.
Events of the past week in the gold market:
Last Sunday, the Chairman of the Federal Reserve, Jerome Powell, reiterated in a TV interview with 60 Minutes CBS that a rate cut at the March Federal Reserve meeting is very premature and they are not yet convinced about it.
However, Powell also emphasized that if they see weakness in the labor market or inflation convincing enough, they can start cutting interest rates.
The yield on 10-year US Treasury bonds strengthened by over 3% on Monday due to a strong jobs report from the previous week in the US, causing gold to end its trading day near $2020 levels.
On Tuesday, in the absence of high-importance economic news and fundamental catalysts, the US dollar index decreased alongside US Treasury yields, allowing XAU/USD to have a mild upward movement.
However, this positive news did not alleviate concerns about deepening crisis in the Middle East as an Israeli official told Channel 13 that some of Hamas' demands were completely unacceptable as a counterproposal.
On Wednesday, with risk-on sentiment entering the market and S&P stock index hitting new highs, traders entered the Forex market. However, this risk-on environment did not favor the US dollar nor gold to take advantage of the situation and rise.
An interesting event occurred when the yield on 10-year US Treasury bonds managed to rise above 4.1%, causing global gold to decline again. The reason for this increase was the sale of 10-year Treasury bonds at a yield of 4.09% in the US Treasury auction.
On Thursday, the market awaited the weekly initial jobless claims report from the US Department of Labor.
The US Department of Labor reported on Thursday that for the week ending February 3, 218,000 initial jobless claims were filed, which had a significant decrease from the previous week's 227,000 (remember that lower figures strengthen the dollar and lead to a decline in gold).
After this news release, the US dollar maintained its strength against its rivals while global gold faced difficulties.
Meanwhile, Thomas Barkin, President of the Federal Reserve Bank of Richmond, told Bloomberg that they have plenty of time to be patient about interest rate changes and emphasized that he and his colleagues need to see a significant decrease in inflation.
Finally, on Friday, the US Bureau of Labor Statistics (BLS) announced that it had revised its monthly forecast for an increase in the Consumer Price Index (CPI) for December from 0.3% to 0.2%
The department announced that our forecast is for Core CPI to be released at the same rate of 0.3% as the previous figure.
Events in the upcoming week in the Forex and gold markets:
On Tuesday, the US Department of Labor is set to release the important inflation report of America.
The predicted monthly Consumer Price Index (CPI) and Core CPI (excluding food and energy) are expected to be 0.2% and 0.3% respectively.
Keep in mind that if for any reason these figures drop to zero, market traders will start speculating about an early start to the interest rate reduction process by the Federal Reserve, causing market surprises.
If this scenario materializes, the yield on 10-year US Treasury bonds will decrease below 4%, leading to an increase in global gold prices.
According to interest rate predictor tools from CME Group, there is an 82.5% chance that the Federal Reserve will maintain its interest rates unchanged in the March meeting.
Also, the current market situation suggests that if inflation is higher than expected, the US dollar may not have enough room for further gains.
However, if inflation exceeds expectations, the yield on Treasury bonds will increase, causing a significant drop in gold prices.
Furthermore, the US is set to release its important retail sales report for January on Thursday. Since these data are not adjusted for price changes, it is unlikely to attract significant market attention.
In conclusion, until the US inflation report significantly impacts market sentiment regarding the timing of interest rate reductions, investors are unlikely to enter large positions based on other economic news in the coming week.
Instead, traders may focus on technical developments in gold for short-term trading opportunities.
Weekly technical analysis of gold:
The price floor and ceiling of gold last week were at 2014 and 2044 respectively. If you open a daily gold chart now and plot an RSI indicator, you will see that the indicator's peak is pointing downwards and showing a value of 47.
This indicates that control is currently in the hands of market bears, and remember that the upward trend of global gold in the daily timeframe is still intact, with prices currently hitting and pausing at a 50-day moving average.
From a technical perspective, this 50-day moving average has played a supportive role for global gold for several months, providing excellent support.
Key Support Levels in Global Gold Analysis:
Key Resistance Levels in Global Gold Analysis:
If gold sees an increase, the first important resistance level will be $2030. If gold successfully breaks through this area, the next key level is $2040. If market bulls manage to push gold higher, the next resistance levels will be $2050 and $2060.
Happy trading
may the pips be ever in your favor!
