Gold firms as rising Covid-19 cases boost stimulus hopes
· Gold prices hit a two-week high on Tuesday, as investors remained hopeful of further U.S. stimulus measures to counter the economic fallout of a surge in coronavirus cases.
· Spot gold rose 0.2% to $1,867.66 per ounce by 0314 GMT. It rose to $1,869.06, its highest since Nov. 23, earlier in the session.
· U.S. gold futures were up 0.3% at $1,871.70.
· “Markets more or less are pricing in that a deal will get done ... It’s going to be about how large that package happens to be, how soon it comes and how that manifests in inflation expectations going forward,” said IG Markets analyst Kyle Rodda.
· The U.S. Congress will vote this week on a stopgap funding bill to provide more time to reach a deal on Covid-19 relief and avert a government shutdown.
· U.S. Senate Democratic leader Chuck Schumer said there were signs of progress in talks on a bipartisan bill.
· Underscoring the need for stimulus, California on Monday imposed a raft of new Covid-19 restrictions, while New York weighed a ban on indoor dining as nationwide cases continue to soar.
· Gold is seen as a hedge against inflation that could result from large stimulus.
· Technically, gold remains in an overall bearish trend in the medium term, said Margaret Yang, a strategist at DailyFX.
· Since the current stimulus package remains below market expectations, it may not drive prices further going forward, she said.
· If gold fails to break a resistance at $1,870, there may be another pullback with support at $1,800, Yang said.
· Gold Price Futures (GC) Technical Analysis – Sellers Could Return on Test of $1870.30 to $1894.60
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart, however, momentum is trending higher. The main trend will change to up on a move through $1973.30. A move through $1767.20 will reaffirm the downtrend.
The minor trend is up. It changed up on Monday when buyers took out the minor top at $1952.70. This move shifted momentum to the upside. A move through $1824.80 will change the minor trend to down.
The short-term range is $1973.30 to $1767.20. Its retracement zone at $1870.30 to $1894.60 is the primary upside target. This zone is currently being tested.
The minor range is $1904.30 to $1767.20. Its 50% level at $1835.80 is potential support.
The major long-term support zone is $1780.50 to $1705.20. This zone stopped the selling at $1767.20 last week.
Daily Swing Chart Technical Forecast
The direction of the February Comex gold market will be determined by trader reaction to $1870.30.
Bullish Scenario
A sustained move over $1870.30 will indicate the presence of buyers. If this move generates enough upside momentum then look for a rally into the Fibonacci level at $1894.60. Overtaking this level and sustaining the move will put the gold market in a strong position.
Bearish Scenario
A sustained move under $1870.30 will signal the presence of sellers. If this move generates enough downside momentum then look for the selling to possibly extend into the 50% level at $1835.80.
Side Notes
The main trend is down so we expect sellers to show up on a test of $1870.30 to $1894.60. They are going to try to form a secondary lower top. Aggressive counter-trend buyers are going to try to drive the market through $1894.60.
This zone is controlling the near-term direction of the market.
· Silver rose 0.6% to $24.66 per ounce and platinum was steady at $1,021.03, while palladium gained 0.1% to $2,334.38.
Reference: CNBC, FXEmpire
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