Gold still in neutral bias, Upside-downside both risks remain

2022年1月31日

Gold prices are dominated mainly by the USD, geopolitical factors, bank rates, economic crisis, inflation, bond yields, and FED monetary policy.

Last FOMC was a bit hawkish than dovish. That helped the USD to gain against the gold prices. But at the U.S season, 10 years bond dropped a bit. As a result, gold has recovered nearly $20 from last week's low. However, gold price consolidates almost psychological and minor trendline resistance level of $1800.

If the bond market slides today, gold may again go up and test the nearly $1805 price zone.

Two reasons are playing behind the gold's drop.

Powells hawkish statement
Central bank's rate-hiking cycle.

We know if central banks raise bank rates, that negatively impacts gold and bitcoin prices because both don't pay any overnight interest as currency does through swaps.

FED hints they will hike bank rates in March, and every rate decision date is possible to hike though they didn't fix it four times this year. And the bank of England is expecting to rise 25BP rates this week.

These two factors are all other fundamental issues favoring gold to go upside. Covid situation, Russia-Ukraine crisis, United Arab Emirate-Houthis crisis still exist even though higher inflation is another supportive factor that could help gold rise again.

From my experience, I have seen many times, when the inflation is too high, the central bank's rate-hiking can't stop gold buying bias from the investors.

I hope this time we also will see that the gold price rises during the rate hike cycle. So considering every circumstance, I still think as long as gold is above the $1770 price zone, it could test the $1846/1850 price zone again. But before it goes up again, it needs to break and stabilize above the $1805 price zone.

Technical Analysis

From the present rate, immediate resistance is $1800. Breaking above $1800 will open the door for an $1805 price zone. If the gold price stabilizes above $1805, it may drop to nearly $1780 (Trendline Support) again.

But if the gold price manages to break above $1805, the next target is $1828 and finally $1846/1850 price zone.

On the other hand, if the central bank's rate-hiking cycle impacts gold negatively, gold may break below the $1770 price zone. Breaking below $1770 will open the door for the $1750 price zone. Breaking below $1750, the next target is $1725, and the final target to the downside is $1680/1685 price zone.