Gold futures, yesterday gained upward momentum upon the release of the US retail sales figures which came out to -1.2% versus +0.1% expected, sending the greenback lower.
Prior to that event, the precious metal seemed to be overshadowed by other events that kept it lower.
Let’s take a closer look at the most recent fundamentals that could affect the precious metal in the following days.
US-China trade talks
To start with, traders could be expecting further developments from ongoing US-China trade talks before picking a certain direction to place their orders.
Today, representatives of the Trump administration will be meeting the Chinese President Xi Jinping for further talks on the issue.
In our opinion there is not a clear view whether the talks are progressing or not, but we still keep in mind that the issue is surrounded by difficulties.
Some reports point out that the U.S. demands that China make extensive changes to reduce technology product transfers and to apply intellectual property rights.
The back and forth of the two countries on the matter, creates volatility on the US dollar which instantly affects Gold futures prices.
Analysts are now referring to an extension of the talks for 60 days, a point that has not been confirmed yet.
In case progress is announced and the two countries are leaning towards a new deal then some risk could be lifted off the table and so safe havens like Gold, could appreciate further.
However, if news confirm that the talks are not getting anywhere, then the USD could appreciate in value, as it could confirm its dominance among currencies and economies.
In our opinion, a deal consisting the US Sino matter would work out at a 60% to 40% correspondingly, which could keep both sides satisfied and cooperation flowing.
SPDR Gold Trust selling Gold
On another front, Bullion while moving up and down in previous sessions, was not able to break above its recent steady range.
Furthermore, the world’s largest gold-backed ETF SPDR Gold Trust, had increased its selling positions, with holdings down more than 3 percent until now in February.
In general it is evident that Gold futures have been kept down in a way waiting for events to clear up before choosing its course.
In the US, the FED has also said they will remain in a wait and see position, until further notice.
If the financial data confirms negative outcomes like the unexpected US Retail Sales yesterday, or even signs of an economic slowdown, we may see the FED enacting less rate hikes than initially forecasted.
However, dovish Fed expectations are at the moment in the center of the markets sentiment and could prevail in the upcoming FOMC meeting minutes on the coming Wednesday.
The dovish sentiment could persist and support the precious metal to continue to gather strength as bearish comments could send the USD lower.
We must note that even though the main drivers for Gold have been discussed above, worries over decelerating global growth are constantly being displayed in headlines while maters like the Brexit ongoing uncertainty and the Chinese economic slowdown fears are keeping gold bulls energized.
Technical Analysis of Gold (XAUUSD)
Bullion, has formed an upward movement since yesterday when the US retail sales were released.
If the upward momentum, is to continue we may see the precious metal breaking above the 1320.41 (R1) resistance level and aim for the 1326.22 (R2) or even higher for the 1332.95 (R3) resistance area.
A bearish moment would send the shiny metal below the 1315.50 (S1) support level.
Even lower we could see the 1310.17 (S2) support level and even lower is the 1300 (S3) round number.
In a sideways momentum the precious metal could move between the 1320.41 (R1) resistance level and the 1315.50 (S1) support barrier.