Gold: Bulls have started to move up with weekly gains
Overview:- During the last week, we have seen an uptick in the gold where bulls opened at 39900, marked a low of 39675, made a high of 40440 which posted a bullish candlestick on the weekly chart. The way bulls are reacting it seems like they are trying to retest the recent high of 41293. The yellow metal is posting weekly gain despite the uptick in the US dollar. Gold is looking strong and could rise to the psychological resistance of $1600 in the next week or two. The yellow metal began the year on a positive note, rising as high as 41293 on Jan. 8 on US-Iran tensions. The bid tone, however, weakened as tensions subsided and prices fell back to 39262 by Jan. 14. Since then, the yellow metal has silently regained poise by rising back to highs above 40300.
Fundamental Analysis:- What’s particularly noteworthy is that both gold and US dollar are reported a weekly gain. The dollar index, which tracks the value of the greenback, has ended higher for the third straight week. Investors usually pull out money from the gold market during bouts of dollar strength. This time, however, gold has turned a blind eye toward the rise in the greenback. The price action is indicative of the underlying bullish sentiment in the gold market.
Also, the Fed is widely expected to maintain the status quo on rates and reiterate December’s message that sustained above-target inflation is a prerequisite for rate hikes. That would only bolster the bullish pressures around.
The bullish case, however, would weaken if key US data – Durable Goods Orders, Personal Spending and fourth-quarter GDP growth rate – beat estimates by a big margin, pushing stocks and other risk assets higher.
Daily chart of Gold with MACD and RSI plotted
Technical Analysis:- From a technical perspective, we can see that Gold has established a higher low at 39430 with a rounding bottom-like pattern and looks set to challenge 41567. On an hourly chart, a bullish flag pattern can’t be ignored at this moment which is pushing us to keep our view bullish on the gold as long as $1540 i.e. 39430 level remains intact.
The yellow gold is trading and sustaining above all the major and minor EMA lines and providing us a bullish signal for the time being. The current set up also suggests that bulls are holding the grip with their hand and they are not in a mood to lose the grip for the being.
The 14-day relative strength index (RSI) seems to have regained upward trajectory and a bullish crossover on the MACD indicator is the recent development on the daily chart which is pushing us to have a bullish view on the gold. The bullish view would be aborted if prices print a weekly close under the 39263 previous cyclic low. The short term to the intermediate-term trend is up so in an uptrend market always buy on dips will be a profitable strategy…
On the international chart, bulls have given us a valid breakout of the very short term narrow range which suggests us that bulls have won the tug of war and for the time being bulls are driving the car and traders are advised to sit in the car to enjoy the rally. Odds are in favor of bulls and daily to weekly bias remains bearish on gold as long as $1536 level remains intact. The way gold is trading and moving on the daily chart it seems like $1600 level is the unfinished target of bulls.
What next:- The bulls are dominating the bears, leading in the game and playing at the front foot and it seems that bulls are going to continue with this game and will dominate the bears in the near term with full of pace and they are approaching the at 41300 levels in coming weeks. On the contrary, A daily closing below 39650 levels will open the way towards the 39000 and 38500 levels in the coming week. The $1600 is made or break level can be considered as key resistance level followed by $1640 where $1535 is a key support level followed by $1530 level. On MCX the 39650 level is key support level followed by 39250 levels.
Based on the chart and study above we would suggest that positional traders may go for buy at current levels i.e. 40350-400 and accumulate till 40200 for the target of 41300 and 41600 levels with the strict stop loss of 39750 levels.
Update – Gold and Silver