Gold climbed higher yesterday, breaking above the resistance (now turned into support) line of 1132 (S1) and hitting resistance at 1145 (R1). The price structure remains higher peaks and higher troughs above the short-term uptrend line taken from the low of the 14th of January and as a result, I still see a positive near-term outlook. I believe that the bulls are likely to aim for a test at the psychological zone of 1150 (R2) in the near future.
For now though, bearing in mind the proximity of the metal to the upside resistance line taken from the peak of the 15th of January, I would be careful of a possible corrective pull back before the next positive leg.
The RSI has topped within its above-70 zone, while the MACD, although positive, has started topping as well. These indicators support somewhat my view that a retreat could be in the works. As for the broader trend, the break above 1110 (S3) on the 26th of January has confirmed a forthcoming higher high on the daily chart, something that keeps the medium-term outlook positive as well.
• Support: 1132 (S1), 1122 (S2), 1110 (S3)
• Resistance: 1145 (R1), 1150 (R2), 1162 (R3)
Interest Rate Can Help Gold
Fed’s Dudley pushes hike expectations further back Yesterday, New York Fed President William Dudley stated that financial conditions have tightened considerably since the FOMC raised interest rates. If this situation continues until March, policy makers would have to take that into consideration when deciding on interest rates. He also added that any further strengthening of the dollar could have serious consequences for the health of the US economy.
Echoing Vice-Chair Fischer’s recent comments that the slowing global economy could impact growth and inflation in the US, Dudley’s remarks pushed further back market expectations for the second hike to come in March. Investors currently assign a 10% probability for a hike at the next Fed meeting. His comments also served as a catalyst for a major sell-off in USD, which weakened significantly across the board.