Vang SJC

Ending the session yesterday (26/1) , the gold has moved upwards to the 3-month high as investors awaited for the first meeting of the new year of Federal Open Market Committee (FOMC) which is due to begin today. The gold moved between $1,106.87 and $1,122.73/oz, before setting at $1,119.54/oz, up 1.08% from the open price $1,107.71/oz.

The acceleration of the gold price was analyzed here.

FUNDAMENTAL ANALYSIS

Fundamental Analysis

Worries over the global economy mean the US policy makers will probably be slower to raise borrowing costs. There will be less prospects for the Fed rate hike in this FOMC policy meeting, in turn lower rates will benefit gold as the metals do not pay interest. The Fed president Janet Yellen and her fellow officials are expected to hold rates steady at their first gathering of the year, a two-day meeting due on Wednesday. Investors will search for any commentary around risks from emerging economies and China particularly in the statement to be released later in the day.

Stocks around the world slumped today as oil fell back below $30/barrel. The decline in oil price is considered to be the signal of slower global growth and weakness in emerging-markets and triggers the concern about negatively unexpected inflation. China – the world’s second largest economy is suffered from the votilatity in the financial market and the highest net outflow. Capital is leaving at a record pace, while the Shanghai Composite Index has tumbled to a 13-month low and the yuan has lost nearly 6% against dollar since the surprise depreciation shock last summer. The instability in the equities market has urged investors to hunt for gold in order to avoid as much devalue as possible. Gold has become the priority as a safest haven asset.

The physical demand is such a great force that boosts the price of the precious metals. The anticipation of a further weakening in the Chinese currency and the crashing confidence of the nation’s stock market turburlence has prompted traders to add gold to their portfolio due to the risk aversion. Furthermore, consumers, especially the world’s second largest consumer China, are buying gold in the run-up to the Lunar New Year – considered as the peak demand season in February, which support the bullish market of the metals. As the data showed, China’s gold imports from Hong Kong has surged 67% to the highest level in more than 2 years. Other central banks in the emerging markets have to increase the gold reserves as a way to diversify some of the currency risks. The emerging countries have faced pressures to devalue their currencies which are triggered by Chinese economic slowdown and the lower raw material prices, therefore, adding more gold in the reserves.

Today, the market will focus on the FOMC policy statement for more indication of the Fed’s tightening path and also the new home sales data which is forecast at 501,000 and the crude oil inventories which will be as high as 3.8 million barrels. In particular, the new home sales with the average forecast will reflect the US household spending which plays a certain role in the US economy. The oil report released by Energy Information Administration (EIA) is supposed to take a negative effect on the falling oil price and in turn the oil price will hurt the stock market.

TECHNICAL ANALYSIS

Technical Analysis

Currently, at 15:34 pm, GMT +7, the gold price is trading at $1,117.09/oz, down 0.17% compared with the opening price at $1,119.52/oz.

Deriving from the chart D1, the gold price has been in the uptrend for more than a month. Lately the price has tested the strong resistance at $1,112/oz and is expected to get higher.

In the current session, the Fibonacci retracement showing that the the gold price is trading between the level 23.6% at $1,117/oz and the level 0.0% at 1,123/oz with the price approaching the below level 23.6%. The level 0.0% at $1,123/oz has been a strong resistance since November 2015. The price movement is in short candle bodies compared with the movement on yesterday session, which show that the buying positions appear to fall down.

According to the RSI (14) index, the level reaches 51.3 points and gets lower from the average level, indicating an downward trend as the selling position is triggered. More down candles are appearing during the European trading as the German consumer climate has been 9.4 higher than expected and the French consumer confidence rose unexpectedly to 97 from 96 the preceding month. The positive data has changed the investment direction from gold to the Eurozone currency.

Regarding the chart H1, the ADX (14) index shows 25.5 points and the downtrend from 40 to 20 confirms the a decline in the price. The -DI cut +DI from the European session then get upper the the rest indicating the selling position is surpassing. The price movement is getting below the SMA 20, sliding trom the upper bar, according to the Bollinger Band, predicted to be go down further.

SENTIMENT ANALYSIS

Sentiment Analysis

The price is forming a downtrend with the red candles outweighing the green ones. However, the candles have short bodies and short shadow hinting the positions between selling and buying are not firm, investors still await the FOMC meeting for any decisions in investment. Investors would take advantage of the high price in three months to get profit, making the price turn upside down.

The policy statement has a decisive and powerful influence on the price change as whether to buy or sell the yellow metals.

It is widely believed that the Fed will consider the pace for the hike rate in this first meeting of the new year besides listing the concern amid global economy growth, which is poised the demand for a safer such as gold.

It takes about one week ahead to come to the Chinese New Year, which will lift the gold up as people wish for luck and prosperity.

The fears against the stock market uncertainty also put them in the comfort zone with a haven asset like gold.

RISK

Risk

The overbought has occured and lasted for long, putting pressure on the buying positions and triggering off the selling force leading to the price fall. The technical indicators give the selling positions and the downtrend of the price.

If the Fed officials, on the other hand, are likely to give a hawkish tone on their statement, the price of the precious metals will change considerably just in one session.

In addition, the positive data and stimulus hint from the Eurozone economy has also directed the investment into more risky assets.

The falling oil price has caused down inflation outlook, therefore, there is no need for more gold to hedge the oil-led inflation.

Market Commentary

Today, the price may rise as the Fed give a policy statement highlighting the disappointing global growth and softer dollar. Given that case, the gold price may rise as high as $1,130/oz.

Nevertheless, as mentioned in the Risk sector, the price may go down as low as $1,103/oz.

Analyses of Group Fiinvesting

Linh Nhan