Gold short term buy and long term sell. Do you know why?Fundamental View: Yesterday, the US labor market published its inflation data. Inflation reached its highest level in the United States in forty years.
It caused panic and high volatility during yesterday's American session when the CPI report was released. The yield on US Treasury bonds thus pressured the currency, stock, commodity, and metal markets to rise when the report was released.
CPI rose by 0.6% in January after rising by about 0.4% in December, and the annual index over the past 12 months rose to 7.5% from 7% in December, the highest pace since 1981, better than expectations. It indicated an increase to 7.3%, while the annual core index rose to 6% from 5.5% (expectations 5.6%).
US futures expectations, according to the CME FedWatch tool, increased by 50 basis points in the March meeting to more than 80% this morning, Friday, after it was below 20% before the inflation figures, which explains the vital movements of the US dollar and stocks during the session.
The President of the US Federal Reserve in St. Louis, James Bullard, supports raising the US Federal Reserve by half a point in the March meeting and reaching 1% by July supported the expectations of the markets and futures contracts well.
The US dollar, in its first reaction, rose more than 0.50% after the inflation figures, to test 96 levels, before retreating strongly in a wave of profit-taking that did not last long before returning and regaining the 96 levels in the Asian session, and is now trading at 95.95 levels.
Gold also traded in a fluctuating range between the initial reaction and the profit-taking wave before settling on a decline and is now trading at levels of $1828, after testing its highest level in two weeks at $1841.50.
Gold's current sentiment: Gold's current sentiment is positive. We have seen even positive NFP, and overall the US labor market report couldn't get down the gold price. BOE's rate hike also didn't hurt gold. Yesterday, CPI printed positive, which also didn't down the gold price against the USD.
We know from our experience any central bank's favorable rates hurt gold and bitcoin prices. But this economic theory didn't happen with gold and bitcoin prices this time.
These are happening because of covid and higher inflation that causes economic growth slowdown and political crises worldwide. Yemeni Houthi is threatening UAE, and on the other hand, Russia has a chance to attack Ukraine.
Gold is a haven asset and works best against inflation. As a result, investors don't like to take risks to bet on other assets.
Technical View: Yesterday, gold spiked down after the CPI report was released and tested nearly $1821 price zone. But the selling pressure was short-lived, and the gold price spiked up again nearly $1841.50 within a few minutes.
Technically its positive bias has not finished yet, and there is some more room to go upside of gold price.
Immediately resistance is at the $1830 price zone from the present rate. Breaking above $1830, the next target is yesterday's high $1841.50, and the final target to the upside is the $1847 price zone.
On the other hand, there is a trendline resistance at$1847/1850 price zone. As long as the market is below $1850, there still have chances to drop. If the gold price only breaks above the $1855 price zone, we can buy long-term. At the same time, as long as gold won't drop below $1815, there will still have chances to go upside. If the gold price breaks below $1815, the next target to the downside is $1800, and the final target to the downside is the $1790/1785 price zone.
