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FxWirePro: Gold recovers on declining US bond yield,good to buy on dips

Gold has recovered sharply $10 after weaker than expected U.S economic data.US retail sales has declined 1.2% in Dec biggest drop since Sep 2009. The yellow metal hits low of $1301.80 and is currently tracing around $1312. 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: bullish. DXY has once again declined after showing a minor jump above 97.20 level. The index hits high of 97.29 and started to decline from that level.It hits low of 96.95 and is currently trading around 97.06.The index’s major resistance is around 97.71 and any break above targets 98/98.60.. (negative for gold).

USD/JPY: Strong  USD/JPY has declined sharply after a minor jump above 111 on US-China trade pessimism.The pair hits low of 110.277 and is currently trading around 110.29. The pair’s further bullishness only above 111.28 (200- day MA) and any break above targets 112. Slightly positive for gold.

 US 10 year yield : US 10 year yield is trading lower and declined more than 2.5% yesterday on weak US economic data.The yield has been trading weak for past two months and lost nearly 22% from high of 3.25%.It is currently trading around 2.65%. positive for Gold.

 US 2 year yield: It is trading around 2.50%. The spread between US 10 year and 2 year has declined to 15bpbs 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 is facing near term resistance around $1315 and break above will take the gold to next level till $1321/$1330.The yellow metal should break above $1335 for further bullishness.

The near term support is around $1305 and any violation below will drag the commodity down till $1298 (20- day MA)/$1295.Any break below $1276 confirms minor weakness.

 It is good to buy on dips around $1305-06 with SL around $1300 for the TP of $1334.

 

 

 

 

 

 

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