XAU/USD: CGA predicts demand recovery 02 February 2021, 10:25

XAU/USD: CGA predicts demand recovery

02 February 2021, 10:25

Scenario
Timeframe	Weekly
Recommendation	BUY STOP
Entry Point	1871.0
Take Profit	1954.0
Stop Loss	1850.0
Key Levels	1775.0, 1840.0, 1871.0, 1954.0

Alternative scenario
Recommendation	SELL STOP
Entry Point	1840.0
Take Profit	1775.0
Stop Loss	1860.0
Key Levels	1775.0, 1840.0, 1871.0, 1954.0

Current trend

Gold quotes are correcting upwards, trading at 1855.0.

The asset continues to actively respond to changes in USD, but the latest sharp rise in USD index went almost unnoticed due to a sharp drop in the yield of US short-term bonds, which are inversely correlated with gold. The yield on three-month Treasury bills was 0.065%, and the yield on six-month Treasury bills was 0.070%, falling from 0.080% and 0.085%, respectively.

The global outlook for gold remains positive. The China Gold Association (CGA) published a report for 2020, according to which demand for metal from jewelers fell by 27%, from industrialists it went down by 17%, but interest of investors, on the contrary, rose by 9%. Thus, the association expects a recovery in demand for the asset in the first half of 2021, since the return of the economy to previous levels after the pandemic will require more production.

Support and resistance

Asset quotes continue to correct after a significant decline, forming a local upward channel. Technical indicators are still in a state of uncertainty. The fast EMAs of the Alligator indicator approach the signal line, and the histogram of the AO oscillator is trading near the transition level.

Resistance levels: 1871.0, 1954.0.

Support levels: 1840.0, 1775.0.

Trading tips

If the asset continues global growing and the price consolidates above the local resistance at 1871.0, long positions will be relevant with target at 1954.0. Stop-loss – 1850.0. Implementation time: 7 days and more.

If the asset continues correctional decline, and the price consolidates below the support level at 1840.0, short positions can be opened with the target at 1775.0. Stop-loss – 1860.0.