• MTS Gold Evening News 20201216

    16 Dec 2020 | Gold News
  

·         Gold Price Analysis: XAU/USD battles 200-SMA on 4H chart, US stimulus, Fed eyed

 

Gold (XAU/USD) consolidates Tuesday’s surge, trading close to the weekly tops just below the $1860 barrier.

 

The yellow metal rallied nearly 1% a day before and now looks to build on the upside amid rising expectations that the US lawmakers will clinch the much-awaited coronavirus relief aid package.

 

However, the XAU bulls remain mindful of the Fed decision due later on Wednesday, with likely upbeat projections from the American central bank seen hurting the sentiment around gold.

 

From a technical perspective, the four-hour (4H) chart shows that gold is struggling to recapture the horizontal 200-simple moving average (SMA) at $1859.

 

Acceptance above the latter could prompt the bulls to resume its upbeat momentum, in the wake of a descending triangle breakout confirmed early Tuesday.


The next relevant resistance is seen at $1875, the December 8 high. The bulls could then eye a test of the $1900 mark.

 

The Relative Strength Index (RSI) sits beneath the overbought territory, near 67.00, suggesting that there is scope for further upside.

 

On the flip side, the horizontal 50-SMA at $1845 could be back on the sellers’ radars. That level was the previous crucial resistance.

 

Further south, the 21-SMA support at $1840 could likely be probed.

 


 

·         Gold Price Analysis: XAU/USD cheers risk-on around $1,950, posts biggest gains in two weeks

 

Gold wavers around $1,853/54 after refreshing the one-week high before a few hours during Tuesday’s North American trading. Broad market optimism, mainly led by expectations of the US coronavirus (COVID-19) stimulus and vaccine news, propel the yellow metal. US dollar losses add a cherry to the pie.

 

Christmas mood?

Gold buyers are in the Christmas mood even as the covid resurgence hints at tough activity restrictions in the US, Europe and the UK. Recently, New York City Governor Bill De Blasio mentioned capacity constraints in the city hospitals likely leading to strict lockdowns while London is heading towards Tier-3 curbs on movements.


To battle the COVID-19, vaccines are the best way. After Pfizer-BioNTech, Moderna is next in the line of the US Food and Drug Administration’s (FDA) approval. Chatters that the FDA approved first fully at-home virus test also favored the mood off-late.

 

Elsewhere, the US President-elect Joe Biden pushes Congress to pass the aid package “right away” whereas US Senate majority leader Mitch McConnell says lawmakers won't leave Washington until they get agreement on fresh coronavirus relief.

 

The Brexit uncertainty continues despite recent chatters that the UK is close to the deal. Further, the US-China tension escalates as MSCI is up for delisting 10 Chinese companies from its global investable markets indexes.

 

Against this backdrop, Wall Street benchmarks are up over 1.0% each whereas the US 10-yeaR Treasury yields also regain the 0.90% mark.

 

Moving on, all eyes will be on the US Federal Reserve’s (Fed) final meeting of 2020. However, key data like UK inflation, PMI and European PMI, not to forget the US Retail Sales, can entertain the market players ahead of the Fed. Although the Fed isn’t expected to alter its monetary policy, any surprises can’t be ruled out and the same will fuel the market moves.

 

Technical analysis

Gold buyers attack a five-week-old resistance line with a clear break above 21-day SMA for the first time in a week. Also acting as an upside barrier is the falling trend line from November 16, at $1,867. Meanwhile, a pullback can eye retest of 21-day SMA, currently around $1,836.

 


·         ECB lifts dividend restrictions, gold likely to see higher volatility

European banks are likely to remain in the spotlight today as the ECB has lifted the dividend ban. This move by the ECB sends a strong signal to the market that the ECB is comfortable with its balance sheets. However, the ECB hasn’t given them a completely free ride as well; it wants to make sure that there are some checks in place, and hence it has asked the banks to keep their dividend and share repurchase program to less than 15% of profit for 2019 and 2020. We are expecting the banks to perform well today as fresh capital is likely to flow.


There is still some optimism in the market about the second stimulus package, and investors believe that they may get good news. Mitch McConnel, Senate Majority Leader’s comment has boosted the optimism among investors. Yesterday, he said that he intends to keep the lawmaker in Washington until they reach a deal.


In terms of the gold price, the precious metal is holding on to its gains, and the hope is that it will continue to move higher. Today is going to be the most volatile day for the gold price for this week.


Today’s events are likely to set the precious metal tone for the rest of the year. Firstly, it is the US core retail data that it is likely to move the dollar, and the expectations are that this number isn’t going to be impressive.


Then you have the Fed meeting later in the afternoon, during which we will hear the Fed's view about the US economy. One thing is pretty clear that the Fed is going to send another strong message to the lawmakers that the US economy needs help, and without this, the economic recovery is likely to remain uneven.


If the Fed sound optimistic about the economy and there is a hint of a small hawkish tone in their tone, we may see the gold price retracing. However, it is also important to keep in mind that the Fed isn’t likely to touch their interest rate anytime soon. It is the forward guidance that matters the most, and that is going to influence the prices.

 

 

Reference: FXStreet 

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