Weekly Market Instrument Update (14/01/2022) : GOLD/DOLLAR

 Weekly Market Instrument Update (14/01/2022) : GOLD/DOLLAR

Weekly Market Instrument Update.

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Fundamental:

It was an important day on Wednesday (12th of January 2022) for the yellow metal as CPI paved the way for investor sentiment. US CPI Year on Year for December resulted in a 40 year high – level that has not been confronted since 1982 – which sent a shock through the dollar. The expectations were 7% and that number was exactly what was released yesterday at 15:30 when CPI data came out. Gold digested the result quite well due to the release being broadly priced into the instrument, but investors are still respecting, and treating it as a safe haven asset.

Gold moved bullish from around $1805 to $1820 at the close of the trading day after the release. Although inflation came out as expected, it is still on the rise at a very fast pace, which is concerning for the US economy. The Federal Reserve is doing its best to use its monetary policy tools – such as interest rates – as an attempt to curb inflation. There are currently 4 interest rate hike expectations which investors are being cautious to act on as the US economy is still in large amounts of debt, and when rates rise, the cost of debt increases.

All of the above information is in Gold’s favor, but traders/investors are trading the information as they receive it which places pressure on the precious metal.

Technical:

With all the above fundamental information being in Gold’s favour, it compliments the technical structure of this pair extensively. Gold is still moving in a descending triangle, respecting levels of support and resistance. Bullish traders have been holding their patience on Gold since August of last year, with volatile movements testing their psychology.

A breakout of the depicted level (whether it be bullish or bearish) will be significant for the future movements of this pair. Gold’s next strong resistance point is approaching at around $1832 which seems very likely, and with enough strength, the bulls could take over from this point. For the second week of January, we have seen gold move 1.78% in the green.

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