Daily Brief, Jan 26 – Everything You Need to Know About Gold Today!

Good morning traders,

The GOLD prices closed at 1,855.80, after placing a high of 1,867.78, and a low of 1,847.07. After placing losses for two consecutive sessions, the GOLD prices remained under consolidation, posting very thin gains on Monday.The US dollar and US Treasury yields remained under pressure on Monday, helping gold to post small gains, as investors had their eyes on the dovish US Federal Reserve and a big stimulus package under US President Joe Biden’s administration.

The White House said that President Joe Biden’s $ 1.9 trillion stimulus plan must be passed urgently. However, the market remained unsure about just how quickly this would happen, which resulted in little relief for the GOLD prices on Monday.

The yellow metal tends to gain traction when stimulus plans are implemented, as they create an additional money supply that debases the dollar and raises the inflationary pressure, which investors typically hedge using the gold. However, in recent weeks, GOLD has acted like anything but the safe haven it’s supposed to be, due to an uptick in bond yields and the dollar. Despite the new trillions, the yields and the dollar rose on the expectations that the Biden administration would add to the US fiscal budget deficit and debt.The latest $ 1.9 trillion stimulus plan is expected to be passed easily by the House of Representatives, which is dominated by Democrats who back Joe Biden. After that, the bill will be passed to the Senate, where his party has an effective majority of just one. There is speculation that the relief plan might get jammed there, due to a lack of adequate support.

To get the bill passed, and in order to reach a compromise, the administration might propose a few mid-sized relief bills rather than a chunky trillion-dollar one. That could provide a slower climb for gold prices than a runaway rally towards $ 2,000 an ounce, and the return to record highs that many have anticipated for months. Furthermore, the uptick in the yellow metal on Monday could also be attributed to the rebound in bitcoin prices. The cryptocurrency reached record highs above $ 40,000 earlier this month, and this has drawn institutional buyers.

Meanwhile, the GOLD prices will also be affected by the Federal Reserve’s monthly rate decision this week, followed by Fed Chair Jerome Powell’s news conference. Rates are expected to remain at a near-zero level, where they have stood for almost a year, due to the pandemic. However, Powell’s words will be examined for even the slightest indication of when a recovery is expected to set in, and when the stimulus measures are likely to start tapering.

Over the past fortnight, Powell has insisted that no tapering is going to happen anytime soon, but bond traders have completely ignored him and continued pushing yields higher, in the hopes of proving the Fed chief wrong, and the GOLD bears have also been complicit in the act, hammering the prices of the yellow metal. GOLD futures remained 2.4% down for January, despite last week’s 1.4% rebound, as the combined losses in the first two weeks of January were heavy.

No macroeconomic data was released in the US on Monday, and that left the yellow metal prices at the mercy of the US dollar and bond yields, along with the hopes for a stimulus plan.

Daily Technical Levels
Support               Resistance
1,854.26              1,858.26
1,852.33              1,860.33
1,850.26             1,862.26
Pivot Point:       1,856.33

On Tuesday, the precious metal, GOLD, is trading sideways, holding below a 1,858 resistance level. Above this level, GOLD is likely to find resistance around 1,870, if there is a bullish breakout at 1,859. On the flip side, a bearish breakout at the 1,850 level could trigger a selling trend until 1,841. The RSI and MACD support a selling bias, along with the 50 period EMA. Selling could be seen below the 1,859 level, especially if we see a breakout at the 1,853 support level today.