Lately many market participants have been focusing on this week’s jobs report from the US. This Friday the US Bureau of Labour Statistics releases the Non-Farm Payroll report, the most important piece of macro data before the next Fed meeting. This report is seen as an important indicator on when the Fed might start hiking the interest rates. Some participants expect the rate hike happen in June while most are looking to September as potential starting point for the Fed’s rate hike cycle. However, some prominent analysts believe that the Fed will be patient and start the rate hikes next year. Higher interest rates support the dollar and historically Gold has not done that well during the periods of rising dollar. At the same time demand for physical Gold is solid in Asia. India alone is consuming 800 to 1000 tons of Gold annually and imports to the country are increasing. In addition, China’s interest rate cuts in November 2014 and last Saturday are an indication that the Peoples Bank of China has moved into an easing cycle. This is a factor supporting demand for Gold in China.
The price of Gold reached the medium term ascending trendline a bit more than a week ago and has since been trading between the support at 1200 and a weekly low from the beginning of February. This level also coincides with the 50% Fibonacci retracement level. Gold is getting oversold in terms of Stochastics and I am looking for a move higher over this week or latest the next week.
The resistance level at 1220 coinciding with the 50% Fibonacci level has held the price down while the 1200 area has supported price. Price is ranging sideways which is quite common after downtrend is broken and the market participants fight over the future direction of the gold price. At the moment we have a higher low in place (from yesterday) which indicates that buyers are ready bid for Gold between 1190 and 1200. There is further support from a daily pivot candle from January 2nd this year and the lower Bollinger bands (currently at 1179 and 1188).
Gold, 240 min
Levels outside the lower Bollinger bands and a pivot candle from 24th February have been attracting buyers lately. There was an attempt to take the price higher last week and price was making higher lows and higher highs until the resistance at 1223 proved too much for the buyers. There was rejection candle yesterday (a candle with a long shadow below). This confirms the idea of 1190 to 1200 being an important range for buyers.
Price is now at key levels and I am looking for a move higher from this support. In the recent past it has taken two to three weeks for the price Gold to turn from support levels. Therefore should there be a rally in not so distant future. But as the market participants are looking at this Friday’s jobs release from the US as a potential indication on when Fed might be raising rates the price of Gold might be moving sideways until Friday. Should Friday’s NFP figures be a disappointment, the likelihood of Fed raising rates early would be smaller and this should support the price of Gold. Levels close to or inside the 1190 – 1200 support range should be monitored for price action based buy signals. If you want to learn about price action based trading signals, just join me to educational and live analysis webinars.
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Chief Market Analyst
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