Gold Needs To Hold $1301
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Yesterday’s close: Settled at 1314.6
Fundamentals: Gold is under pressure as the Dollar continues a path of recovery. Fed Presidents Bullard, Kaplan, Dudley and Williams all essentially stayed the course signaling a likely rate hike in March and showed no concern over an ‘expected’ correction in equities. Today we have Philadelphia Fed President Harker at 7:00 am CT. Fed rate hike dissenter, Minneapolis Fed President Kashkari speaks at 8:00 and he will be important to watch for. Yesterday, his partner in dissenting, Chicago Fed President Evans made his case for waiting until the summer before another rate hike. Both want to see more on the inflation side. Most important to us in the Gold trade is positioning, we will discuss this below.
Technicals: Yesterday, we revised major three-star support at 1321.7 down to a two star as we advised this level is likely to get taken out for a couple reasons but mainly as we saw more upside in the Dollar. The Dollar is recovering from oversold territory and the Euro which is nearly 60% of the DX has had a record long position; this needs to be cleansed just as the 21:1 long ratio in Gold does. The good news is that this process is underway. The bad news is that it means major three-star support at 1307.6-1312 will now trade more as a median. We are adjusting this down slightly to 1301.1-1306.6 and we want to see this become sticky on a closing basis. Line in the sand support for us is now 1290.4-1291.5 and we are fine with this being tested as long as the Dollar Index does not get out above the 92 level. Today’s session high aligns with our 1321.7 level and if Gold can get out above there, this would become bullish in the near term once again.
Resistance: 1321.6-1321.7**, 1329.1-1331.9**, 1349.7-1351.4**, 1365-1370***
Support: 1301.1-1306.6***, 1290.4-1291.5***, 1272.9***