Gold stays neutral in bullish territory above the pivot and 61.8% Fibo
- Gold prices have been held up ahead of the 74.6% Fibo retracement of the mid-April 2018 decline as the dollar's downside stalls.
- Central Banks are in no position to contend with the Fed at this juncture, supporting the dollar which benefits from a safe haven bid still while gold yields nothing.
- Gold is currently trading at $1,292/oz, just below the session highs of $1,294/oz.
Gold prices are in a chop on Thursday, moving sideways dependent on risk appetite and the appeal of the greenback. The US dollar has been consolidating the recent correction in the DXY, clutching onto the 96 handle in a partial recovery of the early Jan sell-off from a few pips below the 97 handle.
While market optimism may have improved following news that China will implement stimulus measures to support the Chiese economy, the fact that Central Banks are still in no position to move towards being on par with the Fed gives the dollar the edge. The argument for a neutral outlook for gold at this juncture is underpinned, leaving the psychologically significant $1,300 level elusive. So long as optimism remains elevated, we should continue to see moderate strength in stock markets being sustained, which is adds additional weight on gold as investors seek a return on otherwise idle money.
Politics weighs on bull's planned trajectory
On the flipside, political uncertainty should help underpin demand for the safe haven metal. Investors remain concerned over the U.S. partial government shutdown entering its 27th day would deliver a more lasting impact on economic growth in the first quarter and also the uncertainties that surround Brexit.
With the spot price above the pivot point of 1291 and the 61.8% Fibo at 1287, the technicals picture is still mixed. We have the daily MACD running negative while RSI below 70 still has room to go until it meets prior highs for 2017 and 2018 levels. To the downside, the 2018 50% Fibo level at 1262 was a key target that turns major support. A break of the 21-D SMA that now found down at 1278 is tucked in below S3 as a key initial target for the bears.