Gold Capped by Resistance
Gold prices remain under pressure this week with the futures market continuing to reverse lower from the 2,718 resistance level. A fresh push higher in USD has created headwinds for gold this week. Traders are looking ahead to Thursday’s FOMC meeting and the potential for a less-dovish message from the Fed. While a further .25% cut is priced in this week, the expectation is that the Fed will signal less likelihood of a follow up cut before March, in line with rising inflation and still-strong labour market data. Pricing for a cut in March is currently just above the 50%, reflecting the current uncertainty and the room for a decisive shift in pricing which can create fresh momentum in USD and gold, if seen.
Bitcoin Impact
Alongside the strength in USD this week, gold prices are also being weighed upon by the rise in BTC. While gold has traditionally been used as an inflation hedge, Bitcoin has increasingly attracted inflows based on the same principle and with the market now open to institutional investors, the rise in BTC is attracting capital away from gold and looks likely to continue to do so. The BT-Gold ratio hits fresh highs this week and looks poised to widen further as optimism ahead of Trump taking office next month keeps prices underpinned near-term.
Technical Views
Gold
For now, price remains capped by the 2,718.88 level with 2,604.65 holding below as support. Momentum studies are flattening out here, reflecting the lack of direction. Given the prior bull trend, focus remains on an eventual break higher with 2,7809.40 the next target. If we break below 2,604.56 however, 2,530.59 will be next support to note.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.