Strategy
Buy Gold at $1810. Stop at $1764 with a price target of $1900. Trade duration is expected to last between 2-3 months.
Technical View
Price has moved above the cloud, resulting in a bullish price trend. Conversion line has crossed over the Base line, resulting in a bullish price trend. Lagging Span is above price of 26 days ago but is inside the cloud at the moment. Lagging Span could be above to move out of the cloud soon, confirming the bullish price trend. A Double Bottom chart pattern and an Ichimoku reversal had starting the base building process and price has moved above the neckline and is likely to continue its rally to the Ichimoku price projection target of $1992 based on the 3E price projection. There is also a strong resistance point at $1900. We think price is likely to move to $1900.
MACD is bullish with both of its lines above the zero line. MACD is also rising and hinting of a bullish price trend.
Fundamental View
Monetary policy in the United States is likely to keep the US dollar weak. The US Federal Reserve has hinted at keeping US interest rates low for the next 2 years till 2023. According to Fed’s chairman Powell, the U.S. labour market is far short of where it needs to be to start talking about tapering. As a result, interest rate in the US is likely to remain low in the immediate future with the US Federal Reserve keeping its dovish stance. This is likely to take away the big interest rate advantage that had kept the US dollar strong in the past few years.
Beside ultra-loose monetary policy, the Federal Reserve is likely to embark on a prolong program of bond buying to keep interest rates and yields low. US benchmark 10-year Treasury yields seems to have peaked at 1.776%. 10-year Treasury yields is currently hovering around the 1.60%. With the peak in Treasury yield, the US dollar might have lost a key reason for its rally.
A US stimulus relief package has been passed by Congress and this has helped the US economy to recover from the coronavirus pandemic. Together with COVID-19 vaccination, a stronger recovery in the US and global economy have led to surging crude oil as well as metal prices. This is likely to fuel inflation especially when the Federal Reserve is keeping to its dovish stance. This has led to demand for Gold as a hedge against inflation.