Gold prices seem to remain elevated so far in February, finishing in green territory in the past week and trading higher in the current. As we head into a week with limited economic releases but of significant importance, geopolitical tensions, international economic monitoring, and central bank developments continue to be among the most decisive subjects for the Gold market. The closing of this report will consist of a technical analysis that will accompany our fundamental points.
What has happened in the past days?
During the most recent sessions Gold’s volatility increased after the release of the US employment report for January. With a substantial increase in jobs created which reached 444K, Gold’s price initially dropped upon release of the figures. However, Gold’s price quickly rebounded and by the end of the session on Friday had recovered most of the ground lost. This may have been due to the slight increase of the unemployment rate to 4.0% even though the jobs created surpassed expectations. Moreover, as Monday’s session commenced, Gold prices maintained their steady upsurge and fully recovered the ground lost, while in the US session moved even higher. Monday’s session overall favored the Gold market without the support of economic releases.
China’s economic slowdown
Looking at the global economy, analysts are currently considering the impact of the Chinese slowdown that seems to be becoming more evident recently. In January, both Chinese Manufacturing and Services PMI figures were lower compared to previous readings. Even though the Chinese slowdown may be a consequence of the substantial growth observed at the beginning of the pandemic, it may be creating problems to the international scene. China has been dealing with a red hot real estate market and power supply shortages, along with the Omicron variant destabilizing operations in some provinces. On the other hand, Western countries may be depending on Chinese trade in order to be able to cover for their own products and operations. The uncertainty over Chinese global economic contribution can be supporting Gold’s price in the short term, as it could be limiting output in other countries including Europe or Asia. On the contrary, the US is currently in a strong economic position that could perhaps counter the Chinese slowdown. Yet, we may be observing a rather prolonged Chinese slowdown as some challenges already noted seem to persist.
Economic releases in the current week
Turning to the economic calendar of the current week, Gold traders will be mainly focusing on the January US Inflation data to be released on Thursday the 10th of February in the early US session. In the past, Inflation data has been strongly related to Gold price volatility. Higher inflation rates are positively correlated to higher Gold prices, as the precious metal can cover for higher good prices. At the moment, the expectations are for the Yearly CPI rate to increase further reaching 7.3% from current 7.0%. Once again, if this figure was to materialize we could see the Gold market turning bullish. For the rest of the week we note the weekly Initial Jobless claims figure to be released also on the 10th of February, while the Preliminary University of Michigan figure for February will be released on Friday the 11th.
The Russia-Ukraine concerns
As a final note we must stress the important Russia-Ukraine concerns that are carefully being monitored by traders. We would suggest Gold traders keep their attention fixed to the matter, as it can lift Gold prices much higher if military actions were taken. On the opposite, if the issue would be resolved we could see Gold prices retreating. For the time being, talks between Nation leaders seem to be taking focus off the actual developments on the Ukraine Border which could possibly be intensifying.
Technical Analysis
At the moment, Gold is trading nearby 1820 which is just between our 1830 resistance level and our 1810 support level. Since the 28th of January, when Gold last tested the (S2) 1785 level, an upward trend line has formed even though some short lived corrections have also contributed in the trend. Our final support level stands at (S3) 1765 which was last tested in the final months of 2021. If the precious metal continues to move higher in the following days, a breach above the (R1) 1830 can possibly create some expectation for the (R2) 1847 resistance to come into play. This was January’s high point and traders can possibly monitor the price action nearby that line. At the top, the (R3) 1870 resistance hurdle stands firm, which is a 2.5 month high level. So far in 2022, the price action has been rolled between the (R2) 1847 resistance and the (S2) 1785 support level making this range critical for traders to watch. The RSI indicator has been lifted to the 66 level so far, yet some stabilization is also evident possibly pointing out that bullish tendencies persist but not in an aggressive manner.
