In the previous days leading up to this report, Gold prices did not have a significant boost in neither direction, sell or buy, and this is a reason for a more in depth analysis for the precious metal.
Traders were happy to see XAUUSD, value steadily increase during the previous months but a further advancement can be expected with many fundamentals affecting the market.
This ambiguity coming from the US, whether the FED intends to increase rates and when this will take place, is not helping the shiny metal to break through certain levels.
In previous reports, the FED chairman has stated they plan to continue the rate hikes to control US economic growth and prevent overheating.
However, recent data confirms the opposite situation is taking place, with numbers coming in and implying a slowdown could be in display.
Even though enough jobs were created during December as per the NFP figure the unemployment percentage was also up and other data like Consumer Confidence and ISM manufacturing PMI were both down for the same month.
Could this be what the FED was looking to achieve or is this a coincidence?
No matter how strong the effect was from the NFP additional jobs increase, the USD was not able to maintain its strength and Gold was able to prevail and gain from the mixed financial data and dovish comments from FED chairman J. Powel.
However, Bullion’s sideways movement since the start of January 2019 maybe indicating that some unresolved issues may remain, and so its direction seems indecisive for the near future.
First of all, a matter far from affecting Gold prices but then again related to the US dollar is the US government shutdown.
The current data confirms the longest ever shutdown stretching over 25 consecutive days.
According to FED officials the effect has yet to hit the US economy, and could be significant considering US government employees are going to work without pay.
Once the US dollar starts dropping as a consequence of the shutdown, Gold prices could also jump.
The shiny metal’s sensitivity to risk could be exposed if any US financial data comes out on the negative side, especially if the weakness is due to the shutdown.
On another front, China on Tuesday indicated it would take action in the short term as a tariff war with the United States has had a somewhat negative influence on its trade sector and spread more worries of a sharper economic slowdown.
Financial data indicated credit growth continues to come short, despite months of policy easing.
Analysts believe additional economic stimulus measures could be required.
The pressures spread worldwide as the Chinese economy is among the biggest of the world and has significant potential affecting all continents in case a slowdown is confirmed.
Keep in mind, demand for gold from Chinas jewelry sector reached 60% of the country’s gold consumption in 2018, and could increase further in 2019.
As a conclusion, heading into 2019, the demand for risk protection assets could increase, due to some concerns on the global economic scene.
However most importantly, the interest rate hiking cycle may be heading towards a pause, as many analysts doubt whether the last interest rate hike was needed or not.
We have seen some difficulty from the precious metal’s side to break above our (R1) 1295.26 resistance level, even though it has attempted to do so but has not maintained its strength above it.
If this level is surpassed then the next could be the psychological round number of (R2) 1300.00 and after that the 1310.79 (R3) resistance barrier.
While the shiny metal remains in a sideways movement between our (R1) 1295.26 resistance level and our (S1) 1288.04 support level.
Below our (S1) 1288.04 support level, we see Bullion aiming for the 1280.24 (S2) support level.
After that level is breached the next stop could be the 1273.02 (S3) Support barrier.