Vang SJC

Yesterday (21/1), gold inched up as the US unemployment claims fell unexpectedly, simutaneously, ECB signaled further easing policy which lifted the dollar against the euro. The gold moved in a broad range between $1,104.41 – $1, 092.2.7/oz, before setting at $1,100.98/oz, up just a little bit, compared with the opening price $1,100.83/oz.

The cause for the sideway price has been analyzed here.

FUNDAMENTAL ANALYSIS

Fundamental Analysis

The final working day of the week sees a gold drop from the 1-week high at $1,100/oz as the European Central Bank president Mario Draghi has indicated more stimulus, which caused the stock markets to recover and dollar appreciate.

The president Mario Draghi’s dovish remarks seem to have improved the risk sentiment, putting pressure on the gold price. After the central bank left its key interest rate unchanged on thursday (21/1), President Mario Draghi said the officials will “review and therefore possibly reconsider” the bank’s monetary policy at their next meeting in March, raising the expectations of a further cut in interest rates and a potential expansion of the ECB’s huge bond-buying stimulus. The dovish comment from the officials has a huge effect on the equities markets, which rebounced greatly from yesterday.

The stocks market in Asia recovered from 4-year lows, after the markets were given some “fresh air” after the ECB’s hint of more monetary stimulus, while crude oil extended a rally from 12-year lows. The Wall Street also gain some lost grounds, while European markets ended up 1.9%.

The calmness of the equities market has put the precious metal aside as the safe-haven asset demand is fading on market certainty.

Besides, dollar firmed against a basket of currencies, especially the euro, underpinned by rising expectations of monetary easing by other major central banks. The precious metals have been hit by strong dollar which is preferred as profitable asset on market certainty.

Today, in the US, the existing home sales and the CB leading indicators will be released, which gives more insight into the US economic health. The existing home sales shows the annualized number of residential buildings sold during the previous month, which is considered to be a good measure of demand in the real-estate sector. This demand results from the consumer and household spending, which contributes significantly to the US economy. The data is expected to be 5.21 million, bounced back 10% from the previous but still the lowest since May,2015.

In addition, the leading index is published by the Conference board, which is a composite average of ten leading indicators in the US, designed to signal peaks and troughs in the business cycle. Since it is an average, the leading index smooths out some of the volatility of individual components, thereby revealing turning points in the economic data more convincingly than any individual component. Economists forecast the figure will be in negative territory as the downbeat stock prices and high unemployment claims.

TECHNICAL ANALYSIS

Technical Analysis

Currently, at 15:38 pm, GMT +7, the gold is trading at $1, 096./oz, sinking from the opening price of $1,101.48/oz, down 0.5%.

The Fibonacci retracement showing, the gold price is currently trading from $1,099/oz at 38.2% level to 50.0% at $1,096/oz, approaching the high resistance 50.0% since 12 January. The price is forming the downtrend candles with the candle “leg” is pointing to the level 61.8% at $1,092/oz. In the European session, the price move is quite certain as ECB president hinted of easing monetary policy, which weighs on the gold demand.

Deriving from the chart H1, after the price has reaching the 1-week high, the gold market appears to drop into the bear market as the previous week session when the price went up then slid to the low.

Regarding RSI (14) index in chart H1, the level now is 41, which went down from 54.8 point to 50 and below, indicating the gold price is expected to be bearish. The indicator gives the down signals which means the price will continue to decline further.

Taking a look at the ADX (14) index, which showed 29.8 point signalling a new trend. As the ADX line is curving from below and now up to the point nearly 30, the selling position will take place in the short-term. The -DI cut and get above the +DI confiming the downtrend of the price. The price range is between the average line and the below line according to the Bollinger Band, indicating that the price will get lower.

SENTIMENT ANALYSIS

Sentiment Analysis

According to chart H1, price is moving downwards in recent trades today. The first candle with short body indicates that price is down slowly due to the demand in China and Asia session, which turned into the only green candle after the demand is great. Afterwards, the red candles appear with frequency, the price continues to decrease from that. The candle shadow points to $1,094/oz, great loss from the high yesterday.

The concern amid the turmoil of the stocks market seems to fade out as the stimulus hint from the central bank, in turn ignore the demand for gold as a less risky investment.

Investors have also taken profits to benefit from the high price during last session for the weekend, thus, push the price down considerably.

Oil price has recovered by 4% to approximately $30.92/barrels which make the energy sector become more steady and support the global equities. This led to the negative outlook for the yellow metals for a while.

RISK

Risk

Dollar still kept in check as the Federal Reserve is unlikely to raise the interest rate for the next time in the first quarter this year. The unemployments claims, though got below 300,000 filings indicating the firm labor market, fell short of the expectation and somehow spurred concern about whether the US job growth is strong enough or not. The fading global economic growth and the inflation outlook has got it in the way that the US economy is improving.

A number of emerging markets are taking a risky approach on their currencies. According to the Institute of International Finance, emerging markets have suffered a net outflow of $732 billion in 2015, with China accounting for much of that. The weak demand and the negative economy outlooks in these regions will be taken into consideration to buy gold for hedging instead.

As gold price is setting at mutli-years low, ahead of the forthcoming Lunar New Year holiday in China, the second world largest gold consumer, the demand for gold will lift up in one way or another. The price following the great demand will be on track to rise.

Market Commentary

Today, gold may end in red if the global stocks continue to extend its gain after the promising stimulus. Given the case, price is predicted to drop to $1,086/oz.

However, as per discussed in the Risk section, the gold price is likely to climb up to the $1,104/oz threshhold.

Analyses of Group Fiinvesting

Linh Nhan