Gold is trading in narrow range between $1298 and $1276 for past 10 days. The yellow metal recovered nearly $75in the month of Dec on account of dovish Fed and broad based US dollar weakness. It is currently trading around $1289.
The major three factors that drive gold prices
US dollar Index: strong. DXY has recovered of more than 80 pips yesterday. But overall trend is still weak as long as resistance 96.30 holds. Any break below 94.80-94.90 confirms further weakness and decline till 93.84 likely. On the higher side any break above 97.75 confirms bullish continuation.(slightly negative for gold).
USD/JPY: weak. USD/JPY has recovered more than 70 pips after a 100 pips decline. The pair should break below 107.50 for further weakness.It is currently trading around 108.45. Slightly negative for gold
US 10 year yield : US 10 year yield is consolidating after a minor recovery.The yield has declined sharply in past two months and lost nearly 22% from high of 3.25%.It is currently trading around 2.70%.Slightly negative for Gold.
US 2 year yield: It is trading around 2.54%. The spread between US 10 year and 2 year has declined to 16bpbs from 30 basis point. The spread between 5 year and 2- year yield has inverted (US 5 year yield trading below US2 year yield).
Gold technical
Major support $1183
On the higher side, yellow metal is facing strong psychological resistance around $1300 and break above will take the gold to next level till $1320.
The near term support is around $1276(20- day MA) and any violation below will drag the commodity down till $1266/$1252/$1242 /$1234.
It is good to buy on dips around $1284-85 with SL around $1270 for the TP of $1320.


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