Summary:
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Gold trading lower on the day but near 7-month high
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ETF holdings jumped in December
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Rising bond yields and possible resistance above (1298-1309) could cap gains in the near term
Gold is trading slightly lower on the day with the market pulling back a little after reaching its highest level since June on Friday following dovish comments from Fed chair Powell. The market has returned to the 1289-1309 region which contained price for a month from the middle of May until mid-June before a break below here led to a sustained sell-off. Price has been in a pretty clear uptrend of late with the buying momentum pushing the RSI on D1 into overbought territory and peaking at 78.6.
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Gold is now back near the prior swing region from 1289-1309 which could offer some resistance to further gains. The RSI has pulled back a little after flashing overbought a few days ago. Source: xStation
The market received a sizable boost towards the back-end of last year with investors seeking out the precious metal as a perceived safe haven during the global equity rout. Gold-backed exchange-traded funds (ETFs) worldwide registered net inflows of $3.4 billion, a 3 percent annual rise and increased by 69 tonnes to 2,440 tonnes in the year. This was the first year since 2012 that total gold-backed ETF holdings finished above $100 billion, at $100.6 billion, according to the World Gold Council. In December alone, gold-backed ETFs globally rose 3 percent, adding 76 tonnes worth $3.1 billion, for a third-straight month of net inflows, largely driven by North American and European investment, World Gold Council data showed.
Risk-off moves often see both Gold and US government bond yields rise (TNOTE on xStation) and for most of November and December both of these markets did indeed rally. However, the recent recovery in stocks has coincided with a pull back in the TNOTE and this could apply some downward pressure on Gold. The longer term outlook remains favourable for the precious metal, but given the recent gains and the improving risk sentiment which has caused yields to rise (TNOTE to fall), then there could be a pullback in Gold in the coming days - especially if longs decide to take some profits off the table.
The TNOTE and Gold have exhibited a fairly close relationship in the past couple of months with both market rising. However, the TNOTE has now dropped below Gold as risk sentiment has improved and this, alongside the aforementioned resistance (1298-1309) could put a cap on further gains for the time being. Source: xStation
