Gold has managed to surge upwards and is currently trading above its 50-day Moving Average (MA). At present, the price is at $1,838.10. The trading volume has dipped as compared to yesterday, and the Moving Average Convergence Divergence (MACD) is pointing towards a bullish reversal. However, the Relative Strength Index (RSI) has pretty much been moving upwards and currently stands at 63. It is close to an overbought condition, hinting towards a prevailing buyers’ appetite in the market.
Analyst Omkar Godbole from FX Street highlights of a falling wedge pattern seen on the four-hour chart, which points towards a bullish momentum. However, the wedge hurdle is at $1,844, and should this hurdle be breached, the bulls could power on further. Another key resistance for the bulls would then be at $1,875, which is the lower high from Jan 29. At present, the price of spot gold is $1,837.97.
Source: Yahoo Finance
Over in the markets, gold together with other commodities and stocks, benefitted from rising inflation expectations. For a short time yesterday, the U.S.10-year bond yields also rode on this high and moved past 1.20%. Hope to return to normal is clearly evident in the market, as the number of new cases in the U.S. drops and vaccination progresses. Reuters has reported a 25% decline in the number of new cases, its largest drop since the pandemic began.
The unveiling of the $1.9 stimulus package yesterday also boosted optimism that an economic recovery is underway. Key details on the stimulus package that were announced by the Democrats yesterday included $1,400 direct payments to individuals earning less than $75,000 annually, some subsidies on health care, and expansion on tax credits, Market Watch reports.
The Biden Stimulus Package, touted by the International Monetary Fund (IMF), as a driver of the U.S. economic recovery, boosted expectations of rising inflation and lured traders into investments which are potential hedges against inflation.
At the moment, it looks like it’s full steam ahead for the XAU/USD bulls, but let’s continue watching this space if the bears would show up upon appearance of a strong catalyst to support its cause.
XAU/USD (as of Feb 9, 2021, 10.40 a.m., GMT +8) - $1,838.10
FOLLOWME XAU/USD User Sentiment (as of Feb 9, 2021 at 11.15 a.m.)
Short – 54.11%
Long – 45.89%
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