Daily Market Recap - GOLD

Gold prices posted marginal gains on Monday as the metal recouped some of its losses from Fridays decline. The metal has been under pressure last week from a strengthening greenback and higher US Treasury yields. Gold is trading up 0.50 percent on the day at the time of writing, nearing ever so slightly to the critical 1,850 marks.

Last week gave gold traders quite a headache as problems from the distribution of vaccines, rising covid-19 cases, and weakening economic data capped off by a relatively dovish tone from the US Federal Reserve failed to spark a comeback in gold prices.

The main culprit behind the seemingly paradoxical market movement was the strong increase in US Treasury yields. The biggest concern for holders of non-interest-bearing gold is the opportunity cost of foregoing an investment that pays regular interest such as Treasury bills. Since the yield on the 10- and 30-year US T-bills soared last week, many investors were looking to offload gold from their portfolios.

From a technical perspective, gold buyers will likely look to push prices towards the 0.5 Fibonacci retracement level from January highs in order to pivot momentum back in their favor. The main trend in the gold market remains down on the daily chart and nothing short of a break above 1,848.59 will stir up confidence in bulls.

The channel between 1,861.77 and 1,850 will likely be the key area of focus for gold traders as prices have been fluttering back and forth around that point in the past week. If prices manage to hold steady within that range in the near term, gold may have a shot at testing its 20-day MA around the 1,875.58 level.

(Chart Source: Tradingview 18.01.2021)

On the flipside, further selling pressure could drive gold below its immediate support of 1,821.60; especially if US treasury yields continue to post gains. The support around 1,817.58 has held up on several occasions in the previous month but will need a strong signal of a deteriorating economic outlook to keep gold from dropping towards the ultimate seller's target at the 1,780 level.

Disclaimer: This material has been created for information purposes only. All views expressed in this document are my own and do not necessarily represent the opinions of any entity.