FxWirePro: Gold recovers despite strength in US dollar, good to buy on dips

Gold has recovered slightly despite strength in dollar shows that demand for safe haven assets increasing. The yellow metal jumped more $50 in month of Jan on account of dovish Fed and global uncertainty.

The major three factors that drive gold prices

 US dollar Index: bullish. DXY has once again declined after hitting high of 96.67. It is almost like double top and index is trading slightly above 50- day MA around 96.37. Any weekly close above 50- day MA confirms further bullishness.Any break above 96.68 (61.8% fib) confirms minor bullishness and a jump till 97.75 is likely. .(negative for gold).

USD/JPY: Strong  USD/JPY is showing a minor weakness once again after showing a slight jump above 110. The pair’s near term resistance is around 110 and any convincing break above targets 111/112.It is currently trading around 109.68.Slightly negative for gold.

 US 10 year yield : US 10 year yield is trading weak for 3rd consecutive day and hit low of 2.63%.The yield has been trading weak for past two months and lost nearly 22% from high of 3.25%.It is currently trading around 2.70%.slightly positive for Gold.

 US 2 year yield: It is trading around 2.47%. The spread between US 10 year and 2 year has declined to 16bpbs from 30 basis point. The spread between 5 year and 2- year yield has inverted (US 2 year yield trading above US 5 year yield).

Gold technical

On the higher side, yellow metal is facing near term resistance around $1315 and break above will take the gold to next level till $1321/$1330..The yellow metal should break above $1335 for further bullishness.

The near term support is around $1305 and any violation below will drag the commodity down till $1298 (20- day MA)/$1295.Any break below $1276 confirms minor weakness.

 It is good to buy on dips around $1303-04 with SL around $1298 for the TP of $1334.