Daily Brief, Feb 09 – Everything You Need to Know About Gold Today!

Good morning traders,

Prices for the precious metal, GOLD, closed at 1,830.38, after placing a high of 1,839.08, and a low of 1,807.71. The GOLD prices extended their gains on Monday, jumping more than 1%, as expectations of a massive US stimulus package raised the appeal for bullion as an inflation hedge and offset the pressure from a results rally in equities and a stronger dollar. The GOLD prices rose more than 1.4% on the day, coming close to the 1,840 level on Monday.
US President Joe Biden and his Democratic allies in Congress approved a budget outline to allow their $ 19 trillion coronavirus relief package to be delivered soon, without Republican support. On Sunday, US Treasury Secretary Janet Yellen said that full employment could be reached next year if Congress approves the stimulus package.

The likelihood of inflation increased in the market after Yellen said that full employment levels could be attained by 2022, if backed by a $ 2 trillion stimulus package. This boosted the prices for the yellow metal. The hopes for the stimulus package raised the confidence in economic recovery, ultimately pushing the major US stock indexes to record highs.
Although the relief package might not be released until March, bullion found supportive sentiment from the fairly aggressive comments by Treasury Secretary Yellen, regarding the relief package. Yellen also warned that, without additional federal support, the country’s unemployment rate would remain elevated over the next few years. On Monday, the US Dollar Index and the returns from the benchmark US 10-year Treasury note rose again, before falling back and allowing the yellow metal to continue on its recovery path.

World shares also hit a record high on Monday, amid the hopes that the $ 1.9 trillion coronavirus aid package will soon be passed by US lawmakers, to help economic recovery. Wall Street’s three major indices also climbed higher, with Dow Futures up by 0.4%, S&P 500 Futures up by 0.3%, and NASDAQ Futures up by 0.4% on Monday. The hopes for a substantial stimulus plan raised the expectations of economic recovery, supported by the signs of progress in the country’s vaccination program. The market tone has improved lately, with the news of progress on the vaccine rollout, after the US Centers for Disease Control and Prevention said that they had administered over 35 million doses of coronavirus vaccine as of late last week.

GOLD gained on Monday, despite a slightly higher demand for the US dollar, which made bullion more expensive for buyers with other currencies. No macroeconomic data was released from the US side, so the movement of the yellow metal remained consolidated. However, Wednesday will be a packed day for GOLD, as Federal Reserve Chair Jerome Powell will speak about the labor market. The economic docket on Wednesday will also release the US Consumer Price Index data for January. This CPI report will enjoy the undivided attention of investors, amid growing expectations that an uptick in inflation could be larger and longer lasting than the Fed assumes.

The expectations that inflation will rise are increasing as the economy is now improving continuously, after the contraction in 2020, to its deepest level since World War II. If the economy continues to show progress in the second half of this year, inflation could increase too, as the expectations for a rise have already escalated, due to the prospect of a new coronavirus relief package – and the rise in inflation also means more demand for bullion.

Daily Technical Levels
Support               Resistance
1,814.76              1,820.76
1,811.13               1,823.13
1,808.76             1,826.76
Pivot Point:       1,817.13

GOLD trading continues to be bullish, in line with the previous forecast. It is trading at 1,840, holding below an immediate resistance area of 1,844. On the lower side, the support remains at 1,834 and 1,828. A bullish breakout at the 1,844 level could extend the buying trend until the 1,852 mark. The bullish bias is likely to dominate over 1,828. Since this level is a bit far from the current market price, we should look for a bearish bias below 1,844. Good luck!