Where Did You Gold? - Can the Bulls Maintain Control?

Gold bulls have managed to fight back hard since Feb 5 to bring the price above $1,800. At the time of writing, XAU/USD is at $1,814.90 and trading above the 50-day Moving Average (MA), a positive sign to support the case of the bulls. The Relative Strength Index (RSI) is currently at 47, after having dropped from an overbought condition of 47.

In the meantime, just as the bulls and the bears are struggling to take the reins here, a similar sentiment appears to cloud the market. The nonfarm payrolls released on Friday came in at 49,000 against a forecast of 50,000, and the chart below shows a worrying flattening trend of new jobs added to the economy. However, the market was clearly willing to overlook the marginal shortfall in the latest nonfarm payroll as news that the U.S. House has approved a budget bill to fast track the approval of the Biden Stimulus Package, filled the market with hope. 

Source: U.S. Bureau of Labour Statistics

President Biden has announced that he plans to push through the $1,400 stimulus cheques for those earning $50,000 per year. At present, the Republicans are opposing this and have counter-proposed that the amount to be lowered to $1,000 instead. While it appears that more resistance has been cleared for President Biden to get his way, the market cheered on this news, and a sense of optimism filled the air at the expectation of the economy recovering as a result of this stimulus package. As the battle of a risk-on versus risk-off sentiment goes on in the market, similarly a tussle between the gold bulls and bears persists. 

Source: Yahoo Finance

In terms of technical analysis, analyst Anil Panchal from FX Street believes that without a major catalyst to sustain the price above the $1,800 levels, the bulls could be in for a fight, and will need to rise above $1,819, which is the 10-week-old rising trend line. Failing to do so could push the price downwards towards $1,764.60, a November 2020 low. The current price of spot gold lies at $1,820.91.

As a new week begins and with the Lunar New Year only four days away, who will win the battle to reign in this space: can the bulls surge upwards or will the bears take control? Gerald M. Loeb once said, ‘the desire for gold is the most universal and deeply rooted commercial instinct of the human race.’ In this rapidly changing world (and economy), can this still remain true? Let’s watch how the week unfolds for gold.

Sources: FX Street, U.S. Bureau of Labour Statistics

XAU/USD (as of Feb 8, 2021, 10.45 a.m., GMT +8) - $1,814.90

FOLLOWME XAU/USD User Sentiment (as of Feb 8, 2021 at 11.15 a.m.)

Short – 49.21%

Long – 50.79%