During Monday’s Asian trading session, the precious metal managed to extend its early-day positive performance and remained bullish around above the $1,920 level as the sharp rise in global COVID-19 cases and the possibility of more countries imposing tighter restrictions tend to underpin the safe-haven yellow metal. Meanwhile, the broad-based U.S. dollar weakness, triggered by the market upbeat mood, also played its key role in underpinning the gold prices as the price of gold is inversely related to the price of the U.S. dollar. However, the market trading sentiment was being supported by the optimism surrounding the coronavirus (COVID-19) vaccine, Brexit headlines, and the U.S. covid aid package.
In that way, the upbeat market sentiment was seen as one of the key factors that kept the lid on any additional gold gains. Furthermore, the upticks in the gold prices could also be attributed to the escalating US-China tussles, which eventually lend some support to the safe-haven yellow metal. As of writing, the yellow metal prices are currently trading at 1,923.70 and consolidating in the range between 1,893.81 – 1,925.35.
The market trading sentiment managed to extend its last week’s positive performance and stay positive on the day as the U.S. stocks futures’ bullish appearance tends to highlight the risk-on sentiment. Behind this positive performance was the optimism surrounding the coronavirus (COVID-19) vaccine, Brexit headlines, and the U.S. covid aid package. Across the ocean, the latest upbeat prints of Asian activity numbers from Japan, South Korea, Indonesia, and Taiwan for December also played its major role in underpinning the market trading sentiment. However, the positive tone around the market sentiment favors the gold buyers via U.S. dollar weakness.
As a result of the risk-on mood, the broad-based U.S. dollar failed to gain any positive traction and remained bearish on the day. Meanwhile, the losses in the U.S. dollar were further bolstered by the easy money policy of the U.S. Federal Reserve and central bankers elsewhere. It is worth mentioning that the U.S. Federal Reserve is set to release the minutes from its December meeting on Wednesday. In that way, the market players will be looking for more detail on making their forward policy guidance more explicit and the chance of a further increase in asset buying in 2021. Hence, the losses in the U.S. dollar becomes the key factor that helps the gold to stay bid as the price of gold is inversely related to the price of the U.S. dollar.
Elsewhere, the upticks in the gold prices could also be attributed to the concerns over the coronavirus (COVID-19) and tussles between the U.S. and China. The coronavirus (COVID-19) cases continue to rise, with above 85 million COVID-19 cases as of Jan. 4, with over 20.6 million cases of them in the U.S. Apart from the U.S., Japan is also gaining attention amid the recent surge in the cases and the death toll. As per the latest report, Japan recorded more than 3,100 new cases overnight. While Tokyo reported 816 new infections, bringing the cumulative total to 62,590, the largest among the country’s 47 prefectures so far. This, in turn, the government of Japan is seeking expert advice on whether to declare a state of emergency in Tokyo and neighboring prefectures.
Looking forward, the market traders will keep their eyes on Caixin Manufacturing PMI for December, which is expected to reprint 54.9. Meanwhile, the second readings of monthly PMIs from Europe, the U.K., and the U.S. can decorate the calendar ahead. In addition to this, the updates about the U.S. stimulus package will be key to watch. In the meantime, the risk catalyst like geopolitics and the virus woes, not to forget the Brexit, will not lose their importance.
Daily Support and Resistance
Pivot Point 1895.17
On Monday, the gold is trading sharply bullish at the 1,925 level. Gold has disrupted the ascending triangle pattern at the 1,898 mark on the daily chart, and now gold is likely to encounter resistance at 1,933 and 1,965 marks. The buying trend can be seen in gold, but unfortunately, our trades are closed at stop loss. I will be looking to take another buying trade once gold retraces back to 1,913 level. Good luck!