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Precious Metals Recovering on Greenback Weakness

GOLD
  • Spot gold trades back above the 200-dma at 1806.0 - a level that continues to act as a magnet for prices - with today marking a second session in the green as precious metals benefit from broad greenback weakness.
  • The near-term outlook for gold looks broadly neutral, with the 14-day RSI oscillating either side of 50 as the former bullish trend condition (evident across December-into-January) fades.
  • Gold printed a cycle high at $1853.9 on Jan25 - the session before the January Fed rate decision, which saw Chair Powell recognise the difference between this economic expansion and prior business cycles. Powell's press conference has led markets to price close to 5 full 25bps rate hikes across 2022, putting gold on the back foot and again highlighting precious metals' sensitivity to Fed monetary policy.
  • Despite this week's rally, gold remains vulnerable. The sell-off that followed the Fed resulted in a break of the base of its bull channel drawn off the Aug 9 low. The break lower highlights a bearish threat and a more significant reversal. This signals potential for weakness towards $1775.7, the Dec 16 low.
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