Gold: Buy on dips | January 28, 2019

Gold has shown a massive recovery of more than $20 on Friday on hopes of dovish Fed policy and strong Euro . Markets eye Fed policy , Brexit vote and US Non Farm Payroll for further direction. It is currently trading around $1300.

The major three factors that drive gold prices

  US dollar Index: Weak.  DXY halted its 7 day of winning streak and and declined sharply more than 70 pips from high of 96.53 The index is facing trend line resistance around 96.50 and a break above targets 96.95/97.75.On the higher side any break above 97.75 confirms bullish continuation.(slightly positive for gold ).

USD/JPY: Weak. USD/JPY has shown a minor selling after hitting high of 109.99. The pair should break above 110 for further bullishness. It is currently trading around 109.63.Slightly positive for gold .

 US 10 year yield : US 10 year yield is consolidating after hitting low of 2.69%. The yield jumped more than 10% after forming a minor bottom around 2.54%.The yield has declined sharply in past two months and lost nearly 22% from high of 3.25%.It is currently trading around 2.746%.Neutral for Gold .

 US 2 year yield: It is trading around 2.60%. The spread between US 10 year and 2 year has declined to 14bpbs from 30 basis point. The spread between 5 year and 2- year yield has inverted (US 2 year yield trading above US 5 year yield).

Gold technical

Gold continues to trade higher for second consecutive day and closed above $1300 for the first time since May 2018. This confirms major bullishness and a jump till $1320/$ On the higher side, yellow metal is facing strong psychological resistance around $1300 and break above will take the gold to next level till $1325/$1350.

The near term support is around $1288-90 and any violation below will drag the commodity down till $1280/$1276.Any break below $1276 confirms minor weakness.

 It is good to buy on dips around $1295-96 with SL around $1290 for the TP of $1325.