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Gold Price Analysis: XAU/USD to face strong resistance at the $1875-76 area

Gold opened with a bullish gap on the first day of a new trading week, albeit lacked any strong follow-through and remained below three-week tops touched on Friday. XAU/USD bulls now await ascending triangle breakout, FXStreet’s Haresh Menghani reports.

 

·         Gold Price Futures (GC) Technical Analysis – $1869.10 – $1846.00 Retracement Zone Controlling Price Action

The direction of the April Comex gold futures contract into the close is likely to be determined by trader reaction to the main 50% level at $1869.10.

Gold futures are trading higher, supported by a strong surge in silver prices but gains are being capped by a rally in the U.S. Dollar. Near the close on Monday, the market continues to straddle its two-month 50% to 61.8% retracement zone at $1869.10 to $1846.00, signaling trader indecision and impending volatility.

Silver stretched its rally to a third session on Monday, jumping as much as 11.2% to a near eight-year high as retail investors switched their focus from GameStop and other stocks to the beat-up and grossly oversold, in their opinion, precious metal.

April Comex gold is settled at $1863.9, up $13.6.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through $1878.90 will signal a resumption of the uptrend. The main trend will change to down on a trade through $1832.40.

The main range is $1771.30 to $1966.90. The market is currently straddling its retracement zone at $1869.10 to $1846.00. This zone is controlling the near-term direction of the market.

The short-term range is $1966.80 to $1821.30. Its retracement zone at $1894.10 to $1911.20 is a potential upside target and trigger point for an acceleration to the upside.

Daily Swing Chart Technical Forecast

The direction of the April Comex gold futures contract into the close on Monday is likely to be determined by trader reaction to the main 50% level at $1869.10.

Bearish Scenario

A sustained move under $1869.10 will indicate the presence of sellers. This could lead to a test of the Fibonacci level at $1846.00. If this price fails then look for a test of the main bottom at $1832.40. The main trend will change to down if this level is taken out.

Bullish Scenario

A sustained move over $1869.10 will signal the presence of buyers. This could trigger a rally into $1878.90. Taking out this level could trigger a surge into $1894.10 to $1911.20.

 

·         Gold import tax cut in Budget 2021 to curb price surge, illegal inflows

Basic customs duty on bullion imports were cut to 7.5%, which will not only reduce profit margins for smugglers but also lower costs for consumers who saw prices surge to record highs last year.

 

·         Silver jumps 8%, touches 8 year high as Reddit traders try their squeeze play with the metal

The price of silver surged higher on Monday as the Reddit-fueled boom in highly shorted stocks appears to be spilling over into the metals market.

Silver futures rose 8% to at $29.06 an ounce, marking the largest one-day pop in silver on NYMEX since at least 2013. The contracts traded 11% higher at $30.35 an ounce earlier in the day, the highest level since Feb. 15, 2013.

 

·         Fed’s Bostic says economy could recover more quickly than expected

Atlanta Federal Reserve President Raphael Bostic said Monday that he’s not worried about the U.S. economy overheating, though he does think growth could happen faster than many expect.

In an estimate well ahead of most of his colleagues, Bostic, a voting member of the policymaking Federal Open Market Committee, recently drew attention for saying that he thinks the Fed may have to raise interest rates as soon as mid-2022.

He based that on his anticipation that the economy could recover from the Covรd-19 recession rapidly once vaccinations become more widespread and the stimulus being pumped begins to go to more people in need.

Most Fed officials, while anticipating strong growth later this year, don’t see rate hikes coming through 2023.

 

·         Democrats file $1.9 trillion budget resolution, could bypass Republicans on COVID-19 relief

Top Democrats in the U.S. Senate and House of Representatives filed a joint $1.9 trillion budget measure on Monday, in a step toward bypassing Republicans on COVID-19 relief before President Joe Biden met with Republican senators.

Senate Majority Leader Chuck Schumer announced the plan to file a fiscal-year 2021 budget measure in the Senate and House, saying it would allow Congress to fast-track a coronavirus package for passage by both chambers.

 

·         Republican senators held productive talks with Biden on COVID-19 relief: Senator Collins

A group of Republican U.S. senators held productive discussions with Democratic President Joe Biden about COVID-19 relief, but they did not come to agreement on a package, Senator Susan Collins said.

Collins, who had met with Biden together with eight other fellow Republican senators at what she termed an “excellent” meeting in the White House, told reporters she was hopeful Congress could pass another COVID-19 relief package.

 

 

·         CORONAVIRUS UPDATES:

Global Cases: 103.90 (+374,543)
Global Deaths: 2.24M (+8,915)

 

 

No. 1

U.S. Cases: 26.89M (+110,984)
U.S. Deaths: 453,994 (+1,685)

 

No. 2 -6
India Cases: 10.76M (+8,587)
Brazil Cases: 9.23M (25,285)
Russia Cases: 3.86M (+17,648)
UK Cases: 3.83M (+18,607)
France Cases: 3.20 (+4,347)

 

Asian Updates:

No. 37

Japan Cases: 389,518 (+2,776)
Japan Deaths: 5,722 (+68)

 

No. 83

China Cases: 89,564 (+42)
China Deaths: 4,636

 

No. 87

South Korea Cases: 78,508 (+303)
South Korea Deaths: 1,425 (+5)

 

No. 116

Thailand Cases: 19,618 (+836)
Thailand Deaths: 77

 

·         Covid-19 Vaccinations Surpass 100 Million Doses Worldwide

More than 100 million Covid-19 vaccine doses have been administered worldwide, according to the latest data tracked by Bloomberg. It’s a significant milestone that comes just two months after the first vaccine studies were submitted for regulatory review.

In total, more than 101 million doses have been given in 64 countries around the world. The pace of vaccinations continues to increase, with the latest average rate at roughly 4.25 million doses a day, according to data collected by Bloomberg.

In the U.S., more Americans have now received at least one dose than have tested positive for the virus since the pandemic began. Some 32.8 million doses have been given, most recently at an average rate of 1.34 million doses per day.

 

·         Merkel vows to offer all Germans COVID-19 vaccine by end-summer

 

·         U.S. housing market immune to COVID-19 pandemic: Reuters poll

U.S. house prices will continue to race ahead over the next two years, according to a Reuters poll of analysts who said any COVID-19 resurgence was unlikely to knock housing market activity off its current upward course.

 

·         Biden threatens U.S. sanctions after Myanmar coup, launches policy review

U.S. President Joe Biden on Monday threatened to reimpose sanctions on Myanmar following a coup by the country’s military leaders and called for a concerted international response to press them to relinquish power.

 

·         Myanmar coup to dampen U.S. trade, impact footwear companies, experts warn

The coup in Myanmar is expected to dampen the already tepid interest of U.S. and Western companies in investing in Myanmar, and may prompt some big U.S. companies to pull out, trade experts and analysts said on Monday.

 

·         House Democrat urges Biden to declare white supremacy a national security threat

U.S. Representative Jackie Speier sent a letter to President Joe Biden urging him to issue an executive order identifying white supremacy and violent extremism as a threat to national security.

 

·         Taiwan’s economy outgrows China’s for the first time in 30 years, as chips demand soars

The Taiwanese economy grew 2.98% in 2020 compared to a year ago, advance estimates by the island’s statistics office showed on Friday.

It beat the 2.58% forecast by its central bank and edged out Vietnam’s 2.9% growth. Some economists had predicted Vietnam would be Asia’s fastest-growing economy in 2020.

Taiwan’s expansion last year was also higher than China’s 2.3% full year growth in 2020. The island last outgrew its giant neighbor in 1990, when its 5.5% growth beat China’s 3.9%, official data from both sides showed.

 

·         South Korea January inflation speeds up, beating forecasts

South Korea’s consumer prices rose 0.6% in January from a year earlier, government data showed on Tuesday, slightly faster than a 0.5% rise in December 2020 and beating a 0.3% gain tipped in a Reuters survey.

 

·         Iran's Zarif hints at way to bridge nuclear deal impasse

Iranian Foreign Minister Mohammad Javad Zarif suggested a way on Monday to overcome the U.S.-Iranian impasse over who goes first in returning to the 2015 Iran nuclear deal, saying a top EU official could “synchronize” or “choreograph” the moves.

 

·         U.S. House panel announces February 18 hearing on GameStop market volatility

 

·         These two indicators could determine whether the GameStop rally is near its end

GameStop stock has defied gravity in the past and it could again, but there are some signs its stock may be topping out, some strategists say.

GameStop was down sharply Monday, off more than 30% at $225.

GameStop has had a wild ride. It surged to an all time high of $483 last week but appeared to run out of steam Monday, falling well below its Friday close of $325.

The stock closed at $17.25 on Jan. 4, the first trading day of 2021.

1. Call options cost trends

When viewing a stock that’s had a long speculative run, it’s important to look at the call options on the stock when it stops moving higher, said Julian Emanuel, chief equity and derivatives strategist at BTIG.

2. Reduced demand

Two other factors depressing the stock are the reduction in short interest as investors were forced to cover shorts, and that brokers have restricted buying in GameStop, Emanuel added. That takes away an important source of demand, and speculative investors become less interested, he said.

“It seems the Reddit army is moving into a different area,” said Chris Murphy, co-head of derivatives strategy at Susquehanna International Group. “The stock is going down and the volatility goes down.”

“Usually when a stock goes down, volatility goes up,” he said. “In this instance, as people leave and move into other areas, you’re going to see the stock price and volatility go down.”

 

Reference: FXEmpire, FXStreet, CNBC, Reuters, Worldometers, Bloomberg, Ourworldindata