Daily Brief, January 15 – Everything You Need to Know About Gold on Friday!

Happy Friday traders,

During Friday’s early Asian trading session, the yellow metal managed to stop its overnight losing streak, drawing some modest bids around the mid-$ 1,800 level, as the worsening coronavirus (COVID-19) situation and the Sino-US tussle kept the market trading sentiment under pressure, which, in turn, lent some support to the prices for the safe-haven metal. The equity market losses were further bolstered after France introduced a new nationwide lockdown, which instantly raised worries over economic recovery and provided additional support to the gold prices.

In the meantime, geopolitics in the Middle East (tensions between Iran and the US) and the tensions between the UK and China, over the tightening of import laws, added further pressure to the market trading sentiment, underpinning the precious metal. In contrast to this, the optimism over the potential coronavirus vaccines and the probability of an additional US financial aid package have become critical factors that are keeping a lid on any further gains in the yellow metal prices. Gold is currently trading at 1,851.68, and consolidating in the range between 1,845.55 and 1,855.68.

However, the global equity markets failed to stop their overnight negative performance and remained sour, amid Sino-US tensions and growing coronavirus fears. On the Sino-US front, US President Donald Trump recently showed his willingness to impose new sanctions on officials and companies for alleged misdeeds in the South China Sea and imposing an investment ban on nine more Chinese firms with suspected ties to the Chinese military, including planemaker Comac and phone maker Xiaomi (OTC: XIACF) Corp. In return, in response to Foreign Ministry remarks on January 7, the Chinese embassy has accused Washington of “pinning political and ideological labels on economic and trade issues and exploiting its state power to crack down on foreign companies, under the pretext of national security.” These moves will further increase tensions with China, and the fears of a full-fledged trade/political war between the US and China have been weighing on the market trading sentiment and are seen as critical factors that have kept the GOLD prices higher.

Besides this, the reason for the bearish trading sentiment could also be associated with worries about rising numbers of COVID-19 cases and economically painful hard lockdowns. With the increasing pace of new virus cases, the global lockdowns are getting aggressive too. As per the latest report, France has introduced a new nationwide lockdown, while German Chancellor Merkel reportedly wants to toughen the German lockdown. In addition to this, over 22M people are currently under strict lockdown conditions in China’s Hebei province, which surrounds Beijing. The restrictions were imposed after the country posted the largest number of new Covid-19 infections in over five months on Wednesday.

As a result, the broad-based US dollar managed to end its overnight losing streak, edging higher during the early Asian session, as investors started showing preference for the safe-haven assets, in the wake of a risk-off market sentiment. However, the gains in the US dollar seem relatively unaffected by the progress on the US stimulus package, which tends to undermine the US currency. As we have already mentioned several times, US President-elect Joe Biden is expected to reveal his plans for the next round of US fiscal stimulus (which could be worth $ 2T) at 00:15 GMT. Thereby, the gains in the US dollar have become a critical factor that has limited any additional increases in the GOLD prices, as the price of gold is inversely related to the price of the greenback.Looking forward, the market players will keep their eyes on the release of US Core Retail Sales m/m, along with Retail Sales m/m. Apart from this, President-elect Biden’s speech will also be closely followed. Meanwhile, the UK GDP m/m and Goods Trade Balance are also expected to be released later today. And, of course, updates surrounding the Sino-US tussle and the virus woes will not lose their importance on the day.

Daily Support and Resistance
S1 1,803.95
S2 1,825.34
S3 1,835.82
Pivot Point 1,846.73
R1 1,857.21
R2 1,868.12
R3 1,889.51

GOLD continues trading sideways, within a broad trading range of 1,862 to 1,829. The precious metal, GOLD, is likely to find immediate resistance at 1,853 and 1,863. On the lower side, the precious metal is expected to find support at 1,833. Violation of this 1,833 support level could open additional room for selling until the 1,820 level today. The 50 periods EMA and RSI are in support of bias of sale. However, the lack of economic events is keeping the market choppy, between the 1,843 and 1,829 levels. Good luck!