Gold Price Prediction: Bearish Bias in Play, Quick Sell Signal

Good morning, fellas.

The precious metal prices closed at 1741.70 after placing a high of 1746.10 and a low of 1727.10. GOLD prices posted gains on Friday after posting losses for three consecutive sessions. It also posted a second straight weekly gain as investors were getting adjusted to a rising US dollar and increasing US bond yields in a higher inflation environment.

Despite the US benchmark yield on the 10-year Treasury note reaching its 13-months high level on Thursday at 1.75% and the rising prices of the US Dollar Index on Friday that reached level 92, the yellow metal posted gains for the week. Whereas these developments usually tend to suppress the yellow metal prices. The uncertainty among investors grew last week after Fed Chair Jerome Powell declined to give any hint of the central bank increasing its bond purchases. The rising yields have been limiting the rise in risk assets since the start of the year. Powell said that the US overall GDP is expected to expand to 6.5% this year with the declining jobless rate and increasing inflation that could reach 2.4% by the year-end. He added that despite these projections in an economy trying to rebound from the pandemic crisis to 2020, these were not still enough to raise interest rates.

The expectations that economic recovery in the coming months could extend more than projections and eventually lead to high inflation in the market as the central bank has decided not to increase interest rates. These expectations have been supporting the bond yields since the start of this year and weighing on the yellow metal prices. Meanwhile, the Federal Reserve has said on Friday that it would not extend a temporary pandemic regulatory break that is due to expire this month. It means that from the next month, the big US banks will have to restart holding an extra layer of loss-absorbing capital against US Treasuries and central bank deposits.

Over the weekend, the founder of Bridgewater Associates, Ray Dalio, said that Fed would have to raise interest rates given the supply-demand problem for the bonds that are expected to rise due to rising prices of yields. Dalio said that Fed would have to buy more bonds as an oversupply of Treasuries has driven up the yields, which will exert upward pressure on rates. The recent fiscal stimulus announced by the Biden administration will result in more bond sales to finance the spending that will disrupt the bonds’ supply-demand problem. Furthermore, the US production of coronavirus vaccine dramatically picked up speed as the manufacturers produced more doses a week than earlier in the year. The production accelerated after mass vaccination campaigns in the US started. The output from Pfizer / BioNtech and Moderna have been raised by their experience and making of certain raw materials on their own. At the same time, Johnson & Johnson has teamed up with other firms to increase its production. Besides, the United States government has also helped vaccine makers under the Defense Production Act to access supplies. This month, the Biden administration used this act to provide $105 million in funds to help Merck & co. to make doses of Johnson & Johnson’s coronavirus vaccine.

The three authorized vaccines’ monthly output in the US is expected to reach 132 million doses in March. It will be nearly triple the output of February which stood at 48 million. According to these figures, the mass production of vaccines in the US imposed a positive impact on the local currency that kept the gains in yellow metal limited for the week.

Daily Technical Levels:
Support Resistance
1734.04 1743.69
1730.77 1750.07
1724.39 1753.34
Pivot Point: 1740.42

GOLD is trading with a bullish bias, having soared to a $1,742 level amid a weaker dollar and increased safe-haven appeal. Gold is now gaining support around the 1,7237 marks, along with a resistance level of 1,755. The MACD and RSI support a buying trend now, whereas the 20 & 50 periods EMA are also suggesting a bullish bias. On the two-hourly timeframes, the precious metal is gaining support at a 1,737 level that’s extended by an upward trendline. It can exhibit buying trading with an immediate target of 1,755 level. Good luck!