As geopolitical concerns mount about a potential Russian military incursion into Ukraine, spot gold (XAU/USD) prices are finding support via safe-haven demand and, for now, shrugging off the negative headwinds from a firmer US dollar. The subdued tone to trade in US government bond markets, where long-term yields are modestly lower (10 and 30-year -1bps), is also acting as somewhat supportive for the yield-sensitive precious metal.

Gold is moving ahead into a time cycle change, which is likely to feature a season of change favouring a better outlook. Technically, gold is trapped within a current triangle pattern that requires prices to break and sustain over $1,876, Benjamin Wong, Strategist at DBS Bank, reports.

Having reversed from a year-long resistance line, gold prices eye further losses towards 50 and 100-SMA levels, respectively around $1,825 and $1,816, currently poking 61.8% Fibonacci retracement (Fibo.) of November-December downside.

BULLISH AND BEARISH ENTRIES/ TARGET DESTINATIONS :

However, the metal’s further downside will be challenged by an ascending support line from mid-December 2021 near $1,812, a break of which will confirm rising wedge bearish chart formation.

Should bears keep reins past $1,812, theory suggests a gradual south-run towards September 2021 low surrounding $1,721. Though, the monthly bottom and December 2021 lows near $1,780 and $1,755 in that order will offer intermediate halts.

Alternatively, recovery moves will initially aim to defy the rising wedge formation by a clear upside break of the pattern’s resistance line, close to $1,842.

Following that, the previously mentioned yearly resistance line near $1,848 will regain the market’s attention as a break of which will be an open invitation for the bulls to aim for $1,900 and above during the days to come.

To sum up, gold buyers stepped back from the key resistance line but that doesn’t give a warm welcome to the sellers until the quote drops below $1,812.

TUG OF WAR BETWEEN TECHNICALS & FUNDAMENTALS

Jan 24 2022