Gold gains as U.S. stimulus prospects offset firm dollar
· Gold prices rose on Monday, after hitting a 1-1/2-month low earlier in the session, as prospects of a massive U.S. coronavirus relief aid outweighed a stronger dollar and lifted bullion's appeal as an inflation hedge.
· Spot gold XAU= rose 0.5% to $1,836.29 per ounce by 0728 GMT, after falling to $1,809.90, its lowest since Dec. 2.
· U.S. gold futures GCv1 gained 0.4% to $1,836.80.
· "The gold market remains relatively supported at these levels, as the current run of the U.S. dollar has more to do with safe haven, rather than a discernible pivot to a stronger dollar," said Stephen Innes, chief global market strategist at Axi.
· "The U.S. stimulus (plan) is quite large, we're going to get around $1.9 trillion or $1.5 trillion, and either scenario is good for gold," Innes said.
· U.S. President-elect Joe Biden last week unveiled a $1.9 trillion stimulus package proposal to jump-start the economy and said he wants 100 million COVID-19 vaccine shots during his first 100 days in office. is considered a hedge against inflation and currency debasement, likely from large stimulus.
· Although U.S. inflation expectations have risen in anticipation of more U.S. fiscal stimulus, gold has not been the sole beneficiary, bond yields have risen and weighed on gold, Phillip Futures said in a note.
· "Our market view remain bullish for the long term as the U.S. dollar is expected to remain structurally weak in the long term."
· The U.S. Treasury yields scaled a 10-month high last week. US/
· Gold Price Analysis: XAU/USD to stay under pressure while below strong resistance at $1,845
Gold failed to stage a convincing rebound last week. The yellow has been edging higher on expectations of both monetary and fiscal stimulus, recovering from the lows, but further XAU/USD decline toward $1,800 remains on the cards, FXStreet’s Eren Sengezer briefs.
Key quotes
“On Wednesday, the Eurostat will release the Consumer Price Index (CPI) data for the eurozone. If CPI figures trigger a selloff in the EUR/USD pair, strong demand for the buck could also weigh on XAU/USD.”
“The initial support aligns at $1,817 (January 11 low) ahead of $1,800 (psychological level). With a daily close below $1,800, the selloff could continue toward $1,775, the starting point of December uptrend.”
“The 200-day SMA seems to have turned into the first significant hurdle at $1,845. If gold manages to clear that level, the next resistance aligns at $1,860 (50-day SMA) before $1,900 (psychological level).”
· Spot gold may retest support at $1,810
The low at $1,764.29 may be revisited either this week or next week. A break above $1,839 could lead to a gain to $1,862. On the daily chart, gold is riding on a wave C from $1,959.01.
Spot gold may retest a support at $1,810 per ounce, a break below which could cause a fall to $1,791.
The support is provided by the 76.4% retracement of the uptrend from $1,764.29 to $1,959.01. The fall from $1,959.01 looks incomplete. It is categorized as a continuation of the preceding downtrend from the Aug. 7, 2020 high of $2,072.50.
The low at $1,764.29 may be revisited either this week or next week. A break above $1,839 could lead to a gain to $1,862. On the daily chart, gold is riding on a wave C from $1,959.01.
This wave may travel into a wide range of $1,651-$1,769, formed by its 100% and the 61.8% projection levels. After the moderate consolidation from the Jan. 11 low of $1,816.53, this wave may have resumed.
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· BoA forecast for higher for gold from here
Estimates from Bank of America / Merrill Lynch for gold:
For 2021 USD 2063 average
but the analysts expect that to drop back across 2022 to USD1900
Silver to rise in 2022 though:
2021 $28.74
2022 $31.00
· Among other precious metals, silver XAG= rose 1.2% to $25.03 an ounce. Platinum XPT= rose 0.7% to $1,081.10, while palladium XPD= gained 0.3% to $2,389.82.
Reference: Reuters, brecorder, Forexlive, FXstreet
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