Jump to content

Gold resurrection/revival under review

Recommended Posts

Gold is up over 4% in the first two weeks of 2023 after trading above $1900 for the first time since April 2022 as U.S. inflation in December rose at the slowest rate in more than a year.


BG_gold_bar_098098098.jpgSource: Bloomberg


 Tony Sycamore | Market Analyst, Australia | Publication date: Friday 13 January 2023 

The CPI breakdown and implications:

  • Headline U.S inflation in December fell -0.1% M/M for a 6.5% Y/Y rate, well below the 9.1% peak of June 2022.
  • Core inflation gained by 0.3% M/M; however, the Y/Y rate still fell from 6% to 5.7%
  • The slowdown in inflation data brings to the market more evidence that U.S. inflation has peaked
  • In response, U.S. yields and the U.S. dollar index, the DXY both fell sharply.

Why are yields and the U.S. dollar important for gold?

Gold generally holds a negative correlation with both US yields and the US dollar.

The chart below shows that when the US dollar index, the DXY (and yields) are moving lower, gold generally does well. The opposite is also true. When the US dollar index, the DXY (and yields) rallies, gold tends to struggle as viewed into the end of October last year.

Gold vs DXY chart


gold_1_130123.pngSource: TradingView

So what does this all mean for gold?

The December inflation report provides more evidence that the trend lower in inflation is becoming more entrenched. This sets the stage for the Fed to downshift the pace of rate hikes to 25bp at the February FOMC.

A combination that should continue to weigh on U.S. yields and the U.S dollar, and prove supportive of gold.

What do the charts say?

As viewed on the weekly chart below, gold is now firmly back in the middle of the $2070 - $1675 range that has been in place for almost three years.

Gold weekly chart


gold_2_130123.pngSource: TradingView

Aside from being mid-range on the longer time frames, gold is now testing a thick layer of resistance at $1896/1920, which includes the 61.8% fib retracement of the decline from 2070 to $1616 and a cluster of lows and daily highs from last year.

A sustained break above this resistance area is needed to open up a move towards the $1999 high of April last year.

Gold daily chart


gold_3_130123.pngSource: TradingView

Take your position on over 13,000 local and international shares via CFDs or share trading – and trade it all seamlessly from the one account. Learn more about share CFDs or shares trading with us, or open an account to get started today.

Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • General Statistics

    • Total Topics
    • Total Posts
    • Total Members
    • Most Online
      10/06/21 10:53

    Newest Member
    Joined 27/01/23 19:31
  • Posts

    • I am a beginner, and I must say, there are a lot of rules to the trading game that one must abide by if they want to be successful.   Here, the writer mentions several basic rules for day vs swing trading.  However, I find that often times, the reasoning for these rules is not as  obvious for a beginner as it may be for an expert.   The 'why' factor if I may. For example, why must you have a large capital to trade with as a day trader? Because your positions must be large so that a small change in price will be augmented and turned into a large profit. Also, with such high risk, the margin will be specially high, given the trader is taking up large positions at a time.  Without a large amount of capital, positions may be forced to close due to funds being below margin requirements.  When this happens, you can expect to lose tons of cash, fast.  I learned the hard way. All the best, David Franco      
    • USDJPY has been regaining ground this week, but inflation differentials and a three-month trend signal the potential for another turn lower Source: Bloomberg      Joshua Mahony | Senior Market Analyst, London | Publication date: Friday 27 January 2023  USDJPY set for third monthly decline The USDJPY pair has been on the slide since its October high, with the historical 147.63 resistance level ultimately marking the end of the dramatic 21-month rally that saw the pair gain almost 50%. Much of that came through a period that saw US inflation soar as Japanese prices remain subdued. That disparity remains, but the direction of travel has certainly shifted as US CPI declines and Japanese price growth gradually ticks up. The overnight 4.3% figure for Tokyo core CPI represents a four-decade high, with the nationwide figures likely to follow on. The chart below highlights how USDJPY has been heavily correlated with the now tightening gap between US and Japanese inflation. However, it is more evident when shifting that inflation differential forward by seven-months. That close correlation highlights the potential for further downside as long as prices continue to trend in a similar manner. Source: ProRealTime Looking at the daily chart, the recent rebound has taken price up towards the top-end of a descending channel and Fibonacci resistance. This highlights the bearish pattern that has been playing out, with lower highs and lower lows in place in recent months. Unless we see price rise through trendline and 134.77 resistance, another turn lower looks likely for this pair. Source: ProRealTime
    • @MongiIG Hi - You recently covered Long NICKEL Trading the Trend and A. Rudolf did this morning but I see it is Closing only. Please clarify, Thanks D600
  • Create New...