Gold declined more than $15 after a $40 jump from low of of $1280.The yellow metal dip was mainly due to slight recovery in US dollar index on better than expected US jobless claims and Philly fed manufacturing data. It hits low of $1303 and is currently trading around $1308.50. Gold was one the best performer in Jan and has jumped more than $50 on account of dovish Fed and global uncertainty.
The major three factors that drive gold prices
US dollar Index: Bearish. DXY has taken support near trend line and jumped nearly 90 pips .But overall trend is still weak as long as resistance 96.85 holds.The major support is around 95.80 (200- day MA) and any daily close below this level confirms bearish continuation.(positive for gold).
USD/JPY: strong. USD/JPY has halted its 150 pips decline from high of 111.90 and shown a minor recovery .It is currently trading around 110.82. The near term resistance is around 110.95 and any break below targets 111.45/111.69. slightly negative for gold.
US 10 year yield : US 10 year yield shown a major sell-off of more than 4.5% in past two trading session. The yield hits low of 2.50 lowest level in 14-month on dovish Fed.The yield has been trading weak for past two months and lost nearly 22% from high of 3.25%.It is currently trading around 2.599%. positive for Gold.
US 2 year yield: It is trading around 2.407. The spread between US 10 year and 2 year has declined to 11bpbs from 30 basis point. The spread between 5 year and 2- year yield has inverted (US 2 year yield trading above US 5 year yield).
Gold technical
On the higher side, yellow metal has taken support near 200- H MA and shown a good jump.The near term resistance is around $1312 and any break above targets $1316/$1323 (61.8% fib).The yellow metal should break above $1323 for further bullishness.Any break above will take the gold till $1330/$1336.
The near term support is around $1303 (200-H MA) and any violation below will drag the commodity down till $1298/$1292/$1285.
It is good to buy on dips around $1303-04 with SL around $1298 for the TP of $1323/$1330.