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Gold: On the back foot below 10-day SMA amid broad USD strength, risk-on

  • Gold registers the second day of losses under 10-day SMA.
  • US dollar benefits from the upbeat data at home, global traders cheer phase-one deal signing in, receding odds of the US-Iran war.
  • China’s data dump, trade/political headlines should be observed for immediate direction.

Gold prices seesaw near $1,552 during Friday’s early Asian session. The yellow metal dropped the previous day, closed below 10-day SMA, after the US dollar’s (USD) broad gains and market’s rush to riskier assets on the back of improved trade sentiment. Even so, the US Atlanta Fed’s GDPNow anticipated a slower growth figure in the fourth quarter.

Atlanta Fed shrugs off the recently upbeat US data…

As per the latest data from the Federal Reserve (Fed) Bank of Atlanta, mostly known as Atlanta Fed, “the GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2019 is 1.8 percent on January 16, down from 2.3 percent on January 10.”

The greenback earlier benefited from the Retail Sales and Philadelphia Fed manufacturing data on Thursday. Even so, the Atlanta Fed says, “After this morning's retail sales release from the U.S. Census Bureau, the nowcast of fourth-quarter real personal consumption expenditures growth declined from 2.3 percent to 1.6 percent.”

With this, Fed bears will keep holding the reins and the same might weigh on the US dollar at the US market’s open, which in turn could help the precious metal recover some of its losses.

Other than data, optimism surrounding the US-China trade relations also contributed to the market’s risk sentiment. The US and China signed the phase-one agreement but there loopholes to worry. On the other hand, the US-Mexico-Canada Agreement (USMCA) also gets through the US Senate and boosted the market’s risk-on.

That said, the US 10-year treasury yields gained two basis points to 1.81% and Wall Street benchmarks extend their northward trajectory whereas the S&P 500 Futures marks no major gains while taking rounds to 3,315.

Looking forward, investors will keep eyes on the trade/political headlines while China’s fourth quarter (Q4) GDP, December month Retail Sales and Industrial Production could offer immediate direction. Forecasts aren’t flashing goods signs for the world’s second-largest economy.

Technical Analysis

Not only a 10-day SMA level of $1,556 but the weekly top of $1,562 also guards the bullion’s immediate upside. On the downside, September month high near $1,535 and 21-day SMA level of $1,532 seems to challenge short-term bears.


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