Gold is logging solid gains today as we witness broad based Dollar weakness in the FX markets today. Dollar weakness is an ideal environment for gold bulls since the precious metal has proven to be negatively correlated against the Greenback as investors head towards the risk trade. Meanwhile, investors are waiting for America’s ISM Manufacturing PMI number coming in about an hour’s time. It will be interesting to monitor the Dollar’s reaction to today’s U.S. release since investors were buying up the Greenback on positive data during the month of December. Hence, a strong Manufacturing PMI figure could temper gold’s present upward momentum. Despite today’s data release, investors are likely honing in on Wednesday’s U.S. Non-Farm Employment Change number. December’s Dollar rally was triggered by a turnaround in U.S. employment data. Therefore, Wednesday’s release could really move gold and the Dollar should the figure surprise in either direction.
Technically speaking, gold has multiple uptrend lines serving as technical cushions along with 12/31, 12/30 and 12/22 lows. On an encouraging note, gold has set consecutive higher lows after bottoming out in December and we are unable to form a noteworthy downtrend line. Therefore, gold could have some decent upward mobility should the Dollar continue to weaken. Meanwhile, our 4th tier uptrend line could prove to be an important trend line since it runs through 10/28 lows, or the $1025/oz level. As for the topside, gold faces technical barriers in the form of 12/17 highs along with the psychological $1150/oz level.
Present Price: $1117.55/oz
Resistances: $1117.80/oz, $1122.70/oz, $1128.09/oz, $1132.99/oz, $1137.41/oz, $1141.33/oz
Supports: $1110.94/oz, $1104.83/oz, $1100.55/oz, $1096.27/oz, $1092.91/oz
Psychological: $1100/oz, $1150/oz, December lows