Gold has once again recovered after hitting low of $1301.80. The yellow metal was trading weak on account of strong dollar. Gold was one the best performer in Jan and has jumped more than $50 on account of dovish Fed and global uncertainty.
The major three factors that drive gold prices
US dollar Index: bullish . DXY continues to trade higher and jumped another 50 pips yesterday. The index is expected to reach 97.78 and any further bullish continuation only above 97.78. (negative for gold ).
USD/JPY: Strong USD/JPY is trading higher and jumped sharply after breaking 110 level.Any daily close above 110 confirms minor bullishness and a jump till 111/112 is possible. It is currently trading around 110.59.Slightly negative for gold .
US 10 year yield : US 10 year yield has halted its down trend and shown recovery of more than 2.5% from low of 2.624%.The yield has been trading weak for past two months and lost nearly 22% from high of 3.25%.It is currently trading around 2.634%.slightly negative for Gold .
US 2 year yield: It is trading around 2.516%. The spread between US 10 year and 2 year has declined to 17bpbs 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).
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On the higher side, yellow metal is facing near term resistance around $1315 and break above will take the gold to next level till $1321/$1330.The yellow metal should break above $1335 for further bullishness.
The near term support is around $1305 and any violation below will drag the commodity down till $1298 (20- day MA)/$1295.Any break below $1276 confirms minor weakness.
It is good to buy on dips around $1303-04 with SL around $1298 for the TP of $1334.