- Gold recovers amid stimulus optimism, USD weakness.
- T-yields and Wall Street rally to check gold’s upside attempts.
- Gold could track silver prices as the retail-trade frenzy cools-off.
Gold (XAU/USD) staged an impressive bounce from two-month lows on Friday, although ended the week deep in the red above the $1800 mark. Gold tumbled to $1785 on Thursday amid the relentless surge in the US dollar across its main competitors alongside the Treasury yields, in light of the relative strength of the US economic recovery. However, the XAU bulls regained control on Friday, as mixed US employment data cast clouds over the economic optimism, which downed the greenback. The world’s biggest economy added a meager 49K jobs last month despite the unemployment rates ticking down to 6.3% in the reported month.
The inflation-hedge, gold, also benefitted from the renewed optimism around President Joe Biden’s $1.9 trillion stimulus package. Democrats in Congress moved to pass the stimulus plan within two weeks without GOP support, using a parliamentary procedure known as reconciliation.
Starting out the week this Monday, gold has returned to the red zone, although the bulls remain hopeful amid the continued broader market optimism on stimulus hopes. Meanwhile, fresh concerns over the covid vaccines’ efficacy against the South African strain could also offer some support to the precious metal. An increase in physical demand for gold ahead of China’s Lunar New Year holiday season and a broadly subdued US dollar could help put a floor under the prices. However, the recovery could remain in check amid rallying Treasury yields and upbeat sentiment on Wall Street.
Gold Price Chart - Technical outlook
Gold: Hourly chart
The hourly chart shows that gold is holding fort above the upward-sloping 21-hourly moving average (HMA), now at $1810. A sustained break below the latter is needed to negate the recovery momentum.
Since a bullish crossover is confirmed on the said timeframe, with the 21-HMA having crossed the 50-HMA from below, the buyers keep their eyes on the bearish 100-HMA at $1823.
The Relative Strength Index (RSI) has ticked higher above the midline, suggesting that there is more scope to the upside. A move above the 100-HMA would expose the 200-HMA hurdle at $1836.
On the flip side, the downward-sloping 50-HMA at $1806 could come to the bull’s rescue if the 21-HMA support is caved in.
The next relevant support for the bright metal is seen at Friday’s low of $1792.
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