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GOLD OUTLOOK 18 FEB 2016 -

Feb, 18th 12:58

ob-market-outlook

During the European session, gold has slightly dipped on the back of higher stocks, as the oil market has bounced back on the comments of OPEC members.

 

The minutes from the Fed’s last policy meeting released yesterday showed that the central bank has to reconsider raising the interest rates in the near future on fears that the uncertainty in the global economy and the volatility of the financial markets could hurt the health of the US economy. The delay in the next rate hike(s) is considered beneficial to boost the price of ​​ gold.

 

However, last week's initial jobless claims are expected to stay close to a decade low with a forecast for a number of 275.000. The week ending on 12th​​ February is widely expected to show that the figure for the unemployment claims, may be the lowest since the beginning of the year. The data is inclined to indicate labour market growth, which helps support the FOMC in tightening its monetary policy.

 

In addition, while the declining inflation expectation has become a worry for the FOMC officials, the context seems to vary for now. The price of energy has rallied on the support of OPEC members to freeze the output at january levels. If the chance of higher oil prices lasts longer, inflation is unlikely to fall, which will weigh on the Fed rate hike outlook and in turn push the precious metal back into a bearish market.​​ 

 

As with the global equity market, stocks have stabilised for the time being with the rise of Asian stock markets, and the advance in US shares, as the jump in the oil prices have boosted the market. There is no turbulence in the market, leading to a lower demand for safe-haven assets such as gold.

Fig: GOLD Daily Technical Chart

On The Fibonacci grid, the gold price jumped from the Fibonacci 61.8 level and touched the Fibonacci 100.0 level at $1,268/oz then bounced back in three consecutive red candles. The price is heading towards the original Fibonacci 61.8 level, suggesting a further ​​ downtrend. RSI is dropping from the overbought zone, hinting a further fall. The precious metal is expected to touch the price of 1,194/oz on a confirmation from the likely upbeat data on the job market.

Trade suggestion:

Buy Digital Put at 1187.54 valid till 23.59.00 GMT 19/02/2016

Buy Digital Call at 1217.90 valid till 23.59.00 GMT 19/02/2016

 

The risk:​​ 

There is still a chance for gold to climb up if the US Philadelphia Fed Manufacturing Index remain deeps in the negative territory, suggesting a contraction in the US manufacturing sector. Besides, the forecast for the number of times The Fed will raise rates this year by Bank of America/Merril Lynch has been lowered, while St. Louis Fed President James Bullard has also indicated that the US central bank should not rush into further rate hikes.​​ 

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