Technical View
From the low of $1160 to the high of $1346, it looks like there is still one more high before price peaks if we look from a wave viewpoint. The decline off the high at 1346 has found support in between the Fibonacci 38% to 50% retracement level. This is also close to the previous low, from which the rally to $1346 resumed. The recent decline has likely ended as Stochastic has turned up from an oversold extreme while MACD is about to turn bullish. As long as price stays above 1280, there is a good chance of a price rally to $1366
Fundamental View
Geopolitical tensions
North Korea did not sign any agreement to denuclearize and in recent days, there are news reports of Kim rebuilding his nuclear site.
Brexit dead line is likely to be extended but with both EU and UK unable to come to an agreement on Irish backstop and UK parliament unable to agree on how and even whether to leave EU, uncertainty is bound to favour gold.
Easing of pressure on Emerging Market’s currencies
A weaker US$ is putting less pressure on emerging currencies. Central banks use less money to intervene and support its currency, leading to an increase in purchases of Gold. Uncertainty is another reason for gold purchases. An IMF’s report in Jan 2019 showed China purchased 11.82 tons of gold, India bought 6.53 tons, Qatar bought 6.26 tons and Turkey purchased 5.44 tons. Source : Bloomberg
A patient Federal Reserve Bank
Fed had said it will be flexible and patient in its approach to rate hike. A delay in rate hike is taking the pressure off gold. A higher interest rate means the cost of holding gold is expensive over a long period of time. A lower US interest rate leads to a weaker US$ and makes Gold stronger as well.
Strategy
We would recommend buying Gold at current $1307 for a price move to $1366. Protective stop can be placed at $1280. Trade duration is 3 months.