Despite the weakness of the US dollar, gold declined at the end of last week’s trading, reaching the $1810 level, after gains in the same week pushed it to the $1855 level. The price of gold now stable between the 38.20% and 50% retracement on the hourly chart. Trading continues within the very choppy bearish channel formation below the 100-hour and 200-hour simple moving average lines. The recent bounce has prevented gold from crossing to the oversold levels of the 14-hour RSI.
Amid tight restrictions imposed to control the coronavirus pandemic, the British economy contracted at a record pace in 2020, despite output growing faster than expected in the fourth quarter, avoiding the risk of another recession. GDP recorded a decline of 9.9% in 2020 with all four sub-sectors recording an annual decline, the British Office for National Statistics said Friday. The economy grew by 1.4% in 2019.
In the fourth quarter of 2020, Britain’s gross domestic product (GDP) grew by 1.0%, after a moderated growth of 16.1% in the third quarter. Economists expected a 0.5% quarterly growth.
Commenting on the numbers, Thomas Pugh, an economist at Capital Economics, said the rise in GDP in the fourth quarter despite the lockdown is further evidence that the economy has built up some immunity against the closures. The economist added that although the third COVID-19 lockdown means the economy will almost certainly take another step in January, a double technical recession has now been avoided.
On the other hand, investors did not care much about the US inflation figures, and the strongest reaction was to monitor the new US administration’s plans to stimulate the US economy in the face of the effects of the pandemic. The US Federal Reserve officials affirm that US interest rates will be kept at their historically low level unchanged, and work will be done to return the US labor market to its pre-epidemic levels.
Technical analysis of gold:
In the short term, and according to the performance on the hourly chart, it appears that gold is trading within the formation of a bearish channel on the hourly chart. This indicates slight short-term bearish momentum in a highly volatile market. Bulls will target short-term gains around 23.60% Fibonacci at $1838 or higher at $1847. On the other hand, the bears will target the bearish profits at around 61.80% and 76.40% Fibonacci at $1812 and $1802, respectively.
In the long term, and according to the performance on the daily chart, it appears that gold is trading within a bearish channel formation. It is now held below the 38.20% Fibonacci level. This indicates significant long-term downward momentum in market sentiment. Accordingly, the bears will look to extend the current downside towards 50% and 61.80% Fibonacci levels at $1767 and $1696, respectively. On the other hand, the bulls will target the bounce at $1869 or higher at 23.60% Fibonacci at $1927.
With an American holiday today, relative calm is expected during today's trading.
