Where Did You Gold? – Bulls Need Solid Catalyst to Sustain Momentum

On Feb 12, XAU/USD rose majestically to hit $1,829.10, and a glimmer of hope appeared if the bulls could take the reins again. However, the upward momentum was short-lived, and it subsequently took a dip. Although the gold bulls appear to be fighting hard to climb upwards again, they are not able to sustain the momentum. At the time of writing, XAU/USD is $1,821.80 and trading slightly above its 50-day Moving Average (MA). Looking at its Moving Average Convergence Divergence (MACD), the bulls have the upper hand at this moment. Meanwhile, the Relative Strength Index (RSI) has dipped from an overbought condition of 80 to 48. 

Source: Yahoo Finance

John Isige, an analyst from FX Street opines that the bulls would need to break through above the 23.6% Fibonacci level taken between the previous swing high of $1,960 and swing low of $1,785. Successful move past this resistance would empower the bulls on their upward journey. Meanwhile, analyst Anil Panchal from FX Street believes that key support levels for the bears are at $1,814 and $1,785. At the time of writing, the price of spot gold is at $1,831.51.

Over in the markets, it is a shorter week for the U.S. markets as the markets are closed on Feb 15 for Presidents’ Day. There is also a lighter calendar in Asia over the Lunar New Year holidays. Meanwhile, traders would most likely be watching out for the latest U.S. retail sales, industrial production, and initial jobless claims report this week, as a gauge of economic recovery. On Wednesday, minutes from the Federal Reserve’s (Fed) January policy meeting will also be released.

Meanwhile, President Biden had a busy meeting with a bipartisan group made up of mayors and governors to make his case for his proposed stimulus package amounting to $1.9 trillion. This week, the U.S. House Budget Committee is expected to finalise their legislative text this week which would help the Biden Stimulus package to progress a step further. Markets are expecting this stimulus package to spur economic growth, and there is a palatable sense of anticipation over this.

However, the Republicans remain opposed to the size of the stimulus package, and the impact it would have on the already staggering U.S. debt. The U.S. Congressional Budget Office has released its 10-year budget outlook and reported that deficits would rise to $1.9 trillion by fiscal 2031, due to rising interest costs from growing debt.

To surmise, the XAU/USD bulls need a strong catalyst to champion their cause and would this be the week that we see the appearance of such a catalyst? Let’s keep an eye here.

XAU/USD (as of Feb 15, 2021, 11.20 a.m., GMT +8) - $1,821.80

FOLLOWME XAU/USD User Sentiment (as of Feb 15, 2021 at 12.05 p.m.)

Short – 50.22%

Long – 49.78%

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