Gold inched higher on Monday as elevated U.S. consumer prices lifted its appeal as an inflation hedge, while investors awaited a flurry of central bank meetings this week, including by the U.S. Federal Reserve, for further direction.
· Spot gold rose 0.2% to $1,786.51 per ounce by 0213 GMT, after Friday’s 0.8% gain. U.S. gold futures were up 0.2% to $1,787.70.
· Spot silver rose 0.4% to $22.26 an ounce.
· Platinum was flat at $942.00 and palladium gained 1.4% to $1,786.54.
· The Fed is widely expected to signal a faster tapering of asset buying this week, and thus an earlier start to rate hikes.
· The European Central Bank and the Bank of Japan are set to review their monetary policies this week.
· Top Asian hubs saw healthy demand for physical gold last week as domestic prices retreated into the year-end, although volatility in rates deterred retail buyers and jewelers in India.
· XAU/USD paints a bullish technical picture ahead of the Fed
· Gold Price Forecast: XAU/USD could recapture $1,800 amid symmetrical triangle breakout
Gold price has confirmed a two-week-long symmetrical triangle breakout on the four-hour chart, earlier on, following a sustained closing above the falling trendline resistance at $1,785.
The upside breakout clears the path for a test of the downward-sloping 100-Simple Moving Average (SMA) at $1,792.
Acceptance above the latter will bring the $1,800 threshold back into the picture, above which a fresh upswing towards the horizontal 200-SMA at $1,808 is envisioned.
The Relative Strength Index (RSI) looks north above the midline on the said time frame, backing the bullish potential.
On the flip side, any reversal from higher levels will challenge the $1,782 support area, which is where the 21 and 50-SMAs close in.
A decisive break below the latter could trigger a steep drop towards the triangle support at $1,771.
The next relevant support is seen at the fierce cap of around $1,761.
· As Omicron takes hold, inflation concerns rise
For now, equity markets appear to be adopting a glass-half-full approach to recent events, even as US inflation came in at its highest levels in 39 years on Friday, amidst a backdrop of increasing concern that central banks are massively behind the curve.
Nonetheless, as we look ahead to a new week, with the likes of the Federal Reserve, Bank of Japan, Bank of England and European Central Bank all due to deliberate on policy, European equity markets look set to start the week on the front foot.
· Gold Price Forecast: XAU/USD trades with modest gains, remains capped below 200/100-DMA
Gold built on Friday's goodish rebound from the $1,770 area and gained some follow-through traction on the first day of a new week. The headline US CPI accelerated to the highest level since 1982 and acted as a tailwind for the precious metal, which is a proven long-term hedge against rising prices. However, a combination of factors kept a lid on any further gains for the XAU/USD.
The markets seem convinced that the Fed would tighten its monetary policy at a faster pace to contain stubbornly high inflation. This, in turn, continued underpinning the US dollar and capped the upside for the dollar-denominated commodity. Apart from this, the prevalent risk-on environment further held back traders from placing aggressive bullish bets around the safe-haven gold. Investors also seemed reluctant to place aggressive bets, rather preferred to wait on the sidelines ahead of this week's key central bank event risks.
The Fed is scheduled to announce its policy decision on Wednesday and is widely expected to quicken the pace of tapering the bond purchases, setting the stage for an earlier-than-expected interest rate hike. The European Central Bank (ECB), the Bank of England, and the Bank of Japan will also hand down their policy decisions later during the week. The outcome will play a key role in determining the next leg of a directional move for gold prices.
Nevertheless, gold, so far, has managed to hold in the positive territory for the second successive day and remains at the mercy of the broader market risk sentiment/the USD price dynamics. That said, it will still be prudent to wait for a strong follow-through buying before positioning for any further appreciating move amid absent relevant market-moving economic releases.
Technical outlook
Even from a technical perspective, bulls are likely to wait for a sustained move beyond a technically significant 200-day SMA before placing fresh bets. The mentioned barrier, around the $1,793-95 region, coincides with 100-day SMA and should act as a pivotal point for traders. A convincing breakthrough has the potential to push spot prices beyond the $1,800 mark, towards testing the next relevant resistance near the $1,810-15 supply zone. The momentum could further get extended towards the $1,832-34 strong horizontal barrier.
On the flip side, the $1,775-74 area, followed by the $1,770 level should protect the immediate downside. This is followed by the monthly swing low, around the $1,762 region, which if broken will be set the stage for a fall towards the $1,750-48 support zone. Bearish traders could eventually aim to challenge the $1,725 support zone before dragging the XAU/USD to the $1,700 round figure.
· Dollar steady as traders wait for central banks, British pound inches lower on Covid fears
The dollar index, which measures the greenback against a basket of six major peers, was little changed at 96.091, down from as high as 96.938 in mid November, before news of the omicron variant of the new coronavirus became widespread.
On Monday, the euro inched higher to $1.1316 while the yen lost a little ground to 113.51 per dollar.
The pound slipped 0.1% to $1.3257 after British Prime Minister Johnson on Sunday said Britain faces a “tidal wave” of the omicron variant of coronavirus and that two vaccine doses will not be enough to contain it.
· Oil rises on optimism that omicron impact will be limited on fuel demand
Oil prices rose on Monday, extending gains from last Friday, helped by growing optimism that the omicron coronavirus variant’s impact will be limited on global economic growth and fuel demand.
Brent futures climbed 53 cents, or 0.7%, to $75.68 a barrel by 0100 GMT, after rising 1% on Friday.
U.S. West Texas Intermediate (WTI) gained 69 cents, or 1.0%, to $72.36 a barrel, following a 1% increase in the previous session.
· Japan's service-sector mood improves; Omicron, rising costs cloud outlook
· Some Chinese companies suspend production in Zhejiang province on virus outbreak
· Asia-Pacific markets mostly higher as investors focus on central bank meetings
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