Daily Brief, February 11 – Everything You Need to Know About Gold Today!
Good morning traders,
The GOLD prices closed at 1,843.21, after placing a high of 1,855.34, and a low of 1,833.98. The prices for the precious metal, GOLD, extended their gains and rose for the fourth consecutive session on Wednesday, on the back of rising expectations that the US economy will undergo reflation as a result of President Joe Biden’s planned $ 1.9 trillion coronavirus stimulus. After a period of economic uncertainty or a recession, the change in fiscal or monetary policy, in which global growth returns, is known as reflation. The act is designed to stimulate spending, expand output and decrease the effects of deflation. If you are unfamiliar with the concept of reflation, it could also be described as the first phase of economic recovery after a period of massive contraction.
Ever since various drug-makers and pharmaceutical giants revealed the strong efficacy results for their vaccines in November, investors have moved their investments to the assets that improve economic conditions. The ultra-loose central bank monetary policies and hope for more stimulus spending under US President Joe Biden have only added to these bets. GOLD is also considered an inflationary hedge, and the prevailing conditions in the market have been supporting the gains in the prices for the yellow metal.
On the data front, at 18:30 GMT, the Consumer Price Index for January came in, remaining flat with the expectations of 0.3%. In January, the Core CPI declined to 0.0% against the forecast of 0.2%, which weighed on the greenback and lifted the GOLD prices on Wednesday. At 20:00 GMT, the Final Wholesale Inventories for December were released, showing a decline to 0.3%, against the projected 0.1%, which put pressure on the US dollar and pushed the yellow metal prices higher on the board.
The US data pointed to benign US inflation in January, weighing on the greenback and supporting the gold prices on Wednesday. Furthermore, the weakness of the US dollar escalated, due to the prospects of President Joe Biden’s stimulus package of $ 1.9 trillion, which is expected to be passed by US Congress on March 15. These hopes for additional support to the US economy through the pandemic will have a negative impact on the local currency and result in increased inflation, ultimately providing support for the yellow metal, due to its status as an inflation hedge.
On Wednesday, the US Dollar Index (DXY), which measures the value of the greenback against a basket of six major currencies, was flat. On the other hand, the US 10-year Treasury note was down, and this put additional weight on the US dollar, resulting in more gains in the yellow metal prices.
GOLD prices had been in question since August, and we saw the precious metal fall from a record high of $ 2000, into $ 1,700 territory in November and December, on the back of the positive news about coronavirus vaccine breakthroughs, which boosted the US dollar and expanded the US bond yields on economic recovery hopes. On Thursday, US dollar investors will look forward to Fed Chair Jerome Powell’s speech, and the release of Unemployment Claims from last week will also be the focus of attention.
Daily Technical Levels
Support Resistance
1,828.70 1,847.90
1,819.90 1,858.30
1,890.50 1,867.10
Pivot Point: 1,839.10
The GOLD prices continue to slip lower, to trade at 1,835, after placing a high of 1,857. On the lower side, the precious metal might find support at the 1,834 level. On the hourly timeframe, GOLD is looking to cross below the 50 periods EMA, and closing of candles below this level could trigger a further selling bias in gold. However, the precious metal needs to violate the support area of 1,834, in order to reach the 1,824 level. A bearish bias could dominate below the 1,830 level today. Conversely, buying might be seen over the 1,830 level. Good Luck!
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