International spot gold was trading at $1,557.30 an ounce in early Asian trading on Monday. Gold was volatile in the previous session, rising as high as $1,561.12 an ounce before retreating from that point and ending the day up slightly on the positive side at $1,557.09.
Last week’s mood was unsettled, the geopolitical situation in the Middle East was briefly calm and the signing of a trade deal between China and the US failed to make much of a splash. Overall, gold was mixed for the week, falling as low as $1535.79 an ounce at the start of the week but rebounding on Tuesday as the us-china first phase trade agreement was signed.
The next week will see three major central bank rate decisions, with the bank of Japan, the bank of Canada and the European central bank due on Tuesday, Wednesday, and Thursday.
In addition, countries will release important economic data including price indices, unemployment, and PMI indices. U.S. data on existing homes will be released on Wednesday, followed by jobless claims on Thursday.
In addition, the world economic forum 2020 annual meeting and Davos forum will be held from January 21 to 24 with the theme of “building global strength for sustainable development”. The speeches of world leaders and economic experts at the forum will also be watched.
The bank of Japan has kept negative interest rates at minus 0.10 percent for years and maintained its huge bond-buying program. Its most notable recent change has been its pledge to keep interest rates low if necessary.
The BOJ is now widely expected to leave rates unchanged at minus 0.1 percent. In addition, analysts expect the bank of Japan to pledge to keep interest rates at their current low level or even cut them until it reaches its 2 percent inflation target.
Haruhiko Kuroda, governor of the bank of Japan, is likely to signal his determination to keep monetary policy ultra-loose. Mr. Kuroda had previously said he expected short-term and long-term interest rates to remain at current or lower levels for long enough if needed.
The bank of Canada will announce its decision on interest rates on Wednesday. The bank of Canada will leave rates unchanged through 2019 and is unlikely to deviate from that trend in its first decision in 2020.
Although Canada’s Labour market is off its peak at the start of last year, the latest jobs report is encouraging. December’s inflation figures will be released shortly before the decision, and inflation has been healthy. Overall, Mr. Boros, who will step down as President in June, is likely to keep interest rates unchanged and express satisfaction with the Canadian economy.
At 20:45 Beijing time on Thursday, the European central bank announced its decision on interest rates. On Thursday at 21:30 Beijing time, European central bank President Christine Lagarde will hold a press conference where she will set a new direction for the euro/dollar with her general tone on the economy.
At her inaugural meeting, ms Lagarde announced a strategic review by the central bank, according to market analysts. The ECB is unlikely to change policy now, but ms Lagarde’s comments on recent developments are set to shake the euro. If Lagarde makes more hawkish remarks this week, the euro could rebound against the dollar, which would depress the dollar index and indirectly boost gold.
The outlook for gold this week
Over the past week, gold has been in recovery and is approaching a critical turning point that could determine the next major trend, writes CNN money editor Sam Bourgi.
Charles Nedoss, the senior market strategist at LaSalle Futures Group, told Kitco on Friday that gold would have to trade above its 10-day moving average to remain bullish. The current average is around $1,580.
If the first few weeks of January are any indication, 2020 is set to be a bumper year for gold. Just 10 days ago, gold breached $1,600 for the first time in seven years.
With gold up more than $165 since November, it’s time to take a break, FX Empire analyst AG Thorson wrote on Friday. After a brief pause, gold should continue to hit new highs, hitting $1,700 an ounce by march, which would imply an increase of about $150 from current levels around $1,550.
Gold doesn’t rise in a straight line, Thorson writes. After bottoming out in November, gold has entered a moderate upward path. The uptrend accelerated when gold closed above the cyclical trend line of $1,490 on Christmas Eve and confirmed a breakout.
Thorson said the current six-month cycle should see gold’s rally continue until march and then eventually peak. On the target side, it thinks gold could test $1,700 or more, depending on geopolitical events. Once prices peak, gold is not expected to hit a six-month low until late May and early June.
Todd Horwitz, the chief market strategist at BubbaTrading.com, wrote that gold and silver continue to consolidate at high lows as they try to determine their next move. That raises the question of whether gold and silver have hit bottom.
“We can never say with 100 percent certainty that a top or a bottom has been hit,” Horwitz said. “we can only follow the market’s footsteps.” The proprietary algorithms we use never reverse, so let’s be long gold and silver. Combining algorithms and footprints, we can say that the bottom has been touched.
‘while we’re still long, we still have some doubts,’ Mr. Horwitz said. The pattern we saw on January 7 usually signals a market top. Amazingly, the last support was held, establishing a level of support that allowed us to believe that the bottom was in place and that gold and silver would move higher.