Vang SJC

Ending the session last Friday (22/1), gold fell down as the U.S. existing home sales were rising unexpectedly, marking the best year since 2006.

The currency pair moved in a broad range between $1,102.45 and $1, 093.92/oz, before setting at $1,097.01/oz down 0.36% compared with the opening price $1,101.48/oz.

The cause for the price drop last friday was analyzed here.

FUNDAMENTAL ANALYSIS

Fundamental Analysis

Despite a rally in equity markets and the drop of gold price last Friday (22/1), gold has managed to hold its ground around the key area of $1,100/oz. The market is now eyeing on the FOMC statement on thursday (28/01) to have further evidence on the next gradual tightening path this year.

The Federal Open Market Committee (FOMC) meets this week and is widely expected to leave its federal funds rate unchanged at 0.25 – 0.50% as in the conclusion of its policy meeting on wednesday (25/1). The focus will be on the weak inflation triggered by the influence of low energy price and recent global market turmoil on the Fed’s path of interest rates increases this year. The prospect of cooling inflation led by the crash on global commodity market coupled with the turbulence of global equities market could prompt Fed to step on the brake on concerns about the world and the US economic outlook.

The central bank is much likely to consider slowing the hike rate progress in face of a mixed global economic setting, which brings nourishment for the precious metals as the dollar will slow down amid the constant interest rates.

It is highly likely that gold gets a boost as other central banks strike a dovish tone. Not only a more dovish Fed but also the expectations of easier global monetary policies will fill the market. Friday Draghi’s comment has hinted a further easing for Eurozone economy until the coming March given the falling consumer confidence in Eurozone at – 6.3% and the volatility in global financial and commodity markets. In the meantime, Bank of Japan (BOJ) will hold a policy meeting on thursday and friday (28-29/1), given sluggish household spending and slower consumer price rises, the central bank is expected to ease its policy to achieve its 2% inflation goal.

Gold will rise higher, buoyed by speculation that the US Fed have little chance to raise the interest rates this year.

According to the Kitco gold Survey, gold will pick up some momentum and go higher this year on the Fed tone and the greater physical demand for safe – haven assets.

Market sentiment among retail investors and market experts is significantly positive for this week, according to the latest weekly Kitco News Wall Street and Main Street Gold Survey. The survey hit a milestone as a record 1,051 people participated in the vote. Of those who voted, 848 participants, or 81%, are bullish on gold next week; at the same time, 142 people, or 14%, go bearish and 61 (6%) are neutral. When the stocks rally will not last long, along with the dovish comments from the Federal Reserve, gold tends to remain in uptrend ahead of the Lunar New Year holiday.

TECHNICAL ANALYSIS

Technical Analysis

Currently, at 15:30 pm, GMT +7, the gold price is trading at $1,104.15/oz, up 0.64% compared with the opening price $1,097/oz.

Fibonacci retracement showing that the price is trading from level 38.2% at $1,099/oz to and above the level 23.6% at $1,103/oz, moving around the highest resistance since 8 January at $1,1,04/oz. The price move is now forming upwardtrend with almost all of the green candles with long bodies. During session 19, 20 and 21 January, price has repeatedly tested this level but was not able to break through. We predict that if the price hits that level, price will be up.

MUAEA Signal Trend tool which showed buying signals at the beginning of the Asia trade, is currently earrning 640 points for investors.

Deriving from the chart D1, the price has gradually moved away from the strong support 100%, saying the price has escaped the low from November 2015 and has moved towards to the resistance level 61.8%. The price has outperformed since the start of this year, in addtition, gold is expected to rise more this year amid the economy outlook.

Regarding the RSI (14) index, the indicator shows 62.548 point – a trong level above the average 50, pointing out the upward trend and the buying positions are prevailing.

Taking a look at the chart H1, the ADX (14) indicator shows 33 point, signalling the trend strength is at great level, the uptrend will continue as the price will keep on moving in that direction. +DI cut -DI from the very beginning of the session and the two lines have created a wide gap with which the +DI is above the -DI. According to the Bollinger Band, the gold price is between the upper line and the average line, indicating the price movement will be upwards.

SENTIMENT ANALYSIS

Sentimental Analysis

As the chart H1 shown, price is moving up from recent trading. The very first candles with short bodies and no shadows indicate that price inched up during the session as the market focus will be the FOMC meeting from 3 days to go, the trading volume is predicted to remain low until the policy meeting. The bull market is overwhelming the bearish one while the green candles are appearing more.

The few chances for a hike rate late January mean the more demand for less risky assets such as gold. The market sentiment will be prepared for a delay in raising interest rates, hence, the gold becomes the priority in the investment portfolio.

The easing policy all over the globe has raised a concern about much weaker currency market, due to which investors will seek for gold to guard the capital value.

The fear amid unpredictable global turmoil and the non-sustainable rally has encouraged the great gold demand prospects as a haven.

The low physical demand from the world major consumers China and India has disappointed the price as well.

RISK

Risk

The current sharp gains in global equity markets and a broadly stronger U.S. dollar will dampen the appeal of the yellow metals.

The US labor market is still reinforced with more than 200,000 jobs created per month and the unemployment claims below 300,000 filings, the mutli-year low. This firm job growth will provide enough confidence to the Federal Reserve to have the next move in the tightening path. The chance of a hike rate will shadow on the precious metals, which will push a pressure on the gold price.

The ECB president, Mario Draghi will have a speech tomorrow in Frankfurt with more signals on a further stimulus, which helps the dollar regain against the euro and in turn push the gold aside.

Reserve is widely expected to leave its federal funds rate unchanged at 0.25-0.50 percent at the conclusion of its policy meeting on Wednesday.traders will be more focused on whether the possibility of cooling inflation and recent global market turmoil could prompt the Fed to signal concern about the U.S. and world economic outlooks that may raise questions about its pace of interest rate tightening.

Market Commentary

Today, the price may rise as the possibility of a rate hike is fading for the FOMC meeting. Given the case, the price is forecast  to rise at $1, 113/oz.

However, as mentioned in the Risk sector, the price may go down as low as $1,090/oz.

Analyses of Group Fiinvesting

Linh Nhan