The yellow metal has arguably benefitted from early-year seasonal trends, i.e. Chinese new year buying, the ongoing inflation narrative, and also the mentioned sell-off in the greenback against most major currencies.
Chinese new year is just two-weeks away now. As mentioned earlier I do believe we could see seasonal buying, but it will be interesting to see what happens after seasonal gold buying end.
This week the market will pay particularly attention to Chinese data, such as the PBOC rate decision and the Q4 number from the world’s second-largest economy. This could also be a market mover for gold.
One thing to watch this week is the technical towards gold, specifically the $1,830 resistance level. The key technical area has been a price zone that gold bugs have not been able to break for months.
This area is important not only because of the numerous technical rejections from this area, but also because it is the location of a key falling trendline on the monthly time frame. Watch this area closely this week.
Current sentiment metric towards gold show that traders are becoming fairly neutralized. The ActivTrader market sentiment tool shows that 55 percent of traders are bullish towards gold.
This bullish sentiment bias towards gold suggest that gold can still rally, as traders really aren’t that bullish towards the metal, which is typically a great sign.
Gold short-term Technical Analysis
The short-term technicals for the yellow-metal show that a large head and shoulders pattern has been formed, following the recent price rejection from the $1,870 level.
Looking at the four-hour price chart, the $1,830 resistance level is so important because it is the top of the bearish pattern and obviously the main invalidation point of the price pattern.
Gold Medium-term Technical Analysis
The daily weekly chart shows that gold still remains a buy this week while trading above the $1,780 level. Please be aware a big drop is possible if gold losses the $1,780 level.
If a bearish breakout takes place then the $1,730 level offer the last layer of support. Under $1,730 we should see the $1,680 quickly coming into focus.