Daily Brief, February 22 – Everything You Need to Know About Gold Today!

Good morning traders,

The GOLD prices closed at 1,783.91, after placing a high of 1,791.61, and a low of 1,760.57. In the first half of the Friday, GOLD prices fell to a 7-month low, but they managed to reverse their direction in the second half of the day, posting gains for the second day in a row.

Despite the rising prices of GOLD on Friday, the yellow metal remained on course for its biggest weekly tumble since the end of November, on the back of rising US Treasury yields, which wore down the appeal of non-yielding bullion. GOLD was already under pressure, due to many factors, including optimism over global economic recovery, higher yields, robust economic data and a stabilizing US dollar.

An unexpected surge in US jobless claims last week, despite a decrease in the numbers of new coronavirus infections, also weighed on GOLD. The Benchmark US Treasury yields came close to reaching a one-year high earlier this week. This increased the opportunity cost of holding bullion, which pays no interest.

Some analysts also believe that the recent record jump in Bitcoin provided headwind for gold, challenging the portfolio diversifier and store-of-wealth status of the precious metal, GOLD. Meanwhile, on Friday, Richmond Federal Reserve president Tom Barkin said that the US might struggle to reach full herd immunity from the coronavirus, but the economy would probably grow quickly this year, even without it. On the back of vaccine campaigns and the possible massive stimulus package to counteract the effects of COVID-19, along with the low borrowing costs from the Fed, Barkin seemed more optimistic about the expected performance of the US economy this year. Barkin’s comments injected some optimism into the market, weighing on the prices for the safe-haven yellow metal, which sank to their lowest level in months.

On the data front, the Flash Manufacturing PMI for February, which was released at 19:45 GMT, was in line with the expectations of 58.4. This supported the US dollar, as it indicated an expansion in manufacturing activity for the month, which, in turn, weighed on the gold prices. The Flash Services PMI rose to 58.9, against the expected 57.9, supporting the US dollar and capping any further upside in the GOLD prices. At 20:00 GMT, the Existing Home Sales for January came in, showing an increase to 6.69M, against the expected 6.59M, which boosted the US dollar and limited the rising prices of gold. Furthermore, on Friday, the Federal Reserve issued its semi-annual monetary policy report to Congress, in which the Fed said that the risks of ongoing business failures in the US remain considerable, even as the economy begins to emerge from the coronavirus pandemic.

The US Central Bank stated that business borrowing was coming close to historic highs. The report suggested that the insolvency risk for small and medium-sized firms, as well as for some large firms, was considerable, even though large cash balances, low-interest rates and renewed economic growth could reduce problems in the near term.

Fed Chair Jerome Powell will present the report before the US Senate Banking Committee on Tuesday, and before the US House of Representatives Financial Services Committee on Wednesday. First, he will first present his own summary of where the economy stands, and after that, he will raise some questions that are likely to focus on the need for more help for the economy from the federal government, in order to reach a point where the effects of the vaccination programs will make it safe for commerce to resume.
Moreover, New York Fed President John Williams said that the high prices of stocks and other assets could be attributed to the growing economy and low interest rates. He said that market participants and investors around the world are looking ahead through the year, and hopefully into an economy that will recover pretty well, with some strong expansion over the next few years, thus the strong valuation. He also said that he was not bothered by the current pricing of stocks, which were reaching their highest levels in decades, while corporate bond yields were plunging. These comments by Williams also gave the greenback a boost and put a lid on any further gains in the yellow metal.

Daily Technical Levels
Support               Resistance
1,764.80              1,787.00
1,754.60              1,799.00
1,742.60              1,809.20
Pivot Point:        1,776.80On Monday, the precious metal, GOLD, continues to trade with a bearish bias at the 1,787 level, holding above the 10 and 20-period EMAs. The yellow metal is trading with a bullish bias, facing immediate resistance at 1,790. A bullish breakout at 1,790 could extend the buying trend until the 1,800 mark, and further continuation of the trend could lead the GOLD prices towards the 1,816 mark. Conversely, a bearish breakout at 1,780 could push the GOLD price towards levels of 1,770 and 1,764. The RSI and EMA support a bullish bias today. Good luck!