According to market analyst Eren Sengezer, gold prices started the new week on solid ground and rebounded towards $1,800 and extended its rally to $1,830 before moving into the consolidation phase in the second half of the week. Analyst’s evaluations of the developments in the markets and analysis of gold prices. cryptocoin.com We have prepared for our readers.
What was on the agenda of the markets last week?
Markets remained relatively calm on Monday amid a lack of top data releases. However, the dollar managed to find demand after Richmond Federal Reserve Bank Chairman Thomas Barkin told the Wall Street Journal in March that a rate hike was conceivable.
But the dollar faced heavy selling pressure at FOMC Chairman Jerome Powell’s nomination hearing on Tuesday, triggering a sharp rise in gold. Jerome Powell said they’ll need a minimum of four policy meetings before they can come up with a plan to start shrinking the balance sheet. The analyst states that this statement forced the US Dollar Index (DXY) to erase the gains it recorded earlier. Meanwhile, Jerome Powell added that they could try to shrink the balance sheet ‘maybe after this year’.
On Wednesday, the monthly report by the US Bureau of Labor Statistics showed that the Consumer Price Index (CPI) rose 7% year-on-year in December. With that pressure falling in line with market consensus, the dollar continued to lose altitude as investors reassess how aggressive the Fed will be on policy tightening. Additionally, the annual Producer Price Index (PPI) dropped to 9.7% from 9.8% in November, making it more difficult for the dollar to recover from bear pressure.
Meanwhile, the analyst states that the benchmark 10-year US Treasury bond yield, which rose above 1.8% at the beginning of the week to its highest level in two years, reversed its direction and fell to 1.7%, helping gold maintain its upward momentum. On Friday, the U.S. Census Bureau reported that Retail Sales fell 1.9% to $626.8 billion in December. On an annual basis, sales increased 19.3% compared to 2020. The market reaction to these numbers was largely muted, with gold continuing to fluctuate near the top of its weekly trading range.
What will be on the market agenda next week?
The U.S. economy won’t release any high-end data next week, and investors may be hesitant to continue pricing in a less aggressive Fed policy tightening ahead of the January 26-27 policy meeting. The Fed’s blackout period will begin on Saturday, January 15, and FOMC policymakers will not be able to comment on policy. For this reason, market participants will closely monitor US Treasury bond yields. The analyst makes the following assessment:
If the 10-year U.S. Treasury yield falls below 1.7% and stays there, the dollar may face reselling pressure and allow gold to rise. On the other hand, another attempt at 1.8% resistance is likely to put pressure on gold prices.
On Monday, China will release its fourth quarter Gross Domestic Product (GDP) data. If this report points to a slowdown in the activity of the world’s second-largest economy, the analyst reminds that markets may be risk-averse and limit the gains of gold. On Tuesday’s agenda are the December employment report from the UK and the European Central Bank’s (ECB) Policy Meeting Accounts on Thursday. According to the analyst, these data could increase market volatility, but these events are unlikely to have a lasting impact on the dollar’s valuation.
Gold prices technical outlook and gold sentiment survey
Market analyst Eren Sengezer states that the Relative Strength Index (RSI) indicator on the daily chart is holding above 50, which indicates that the sellers are on the sidelines for now. Additionally, the analyst states that the 20-day SMA confirms the bullish outlook by breaking above the 50-day SMA, and gold has closed above the 200-day SMA for the fourth consecutive day. The analyst draws attention to the following technical levels:
On the upside, the key resistance area seems to be formed at $1,830, where the 23.6% Fibonacci retracement is located. With a daily close above this hurdle, gold could target $1,850 ahead of $1,870. On the flip side, $1,800 is aligned as key support. If gold dips below this level and starts using it as resistance, additional losses could be seen towards $1,790 and $1,780.
The FXStreet Forecast Survey shows that gold will remain volatile in the near term. The one-week average forecast stands at $1,815. The analyst states that the mild bearish trend remains intact as the average one-month target has dropped below $1,800.
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