Gold vs. US dollar; capped near 200-DMA vs. short-seller squeeze?

Currently, the Gold spot is trading at $1256.59, up +0.41% or 518-pips on the day, having posted a daily high at $1257.53 and low at $1250.25. On the other hand, the US 10yr treasury yields have traded from 2.37% to 2.35%, down -0.23% on the day at 2.35% or -0.0054.

Political uncertainty and extreme overbought conditions in major equity indexes around the globe have been the formula to lead investors to allocate resources in Gold to protect their wealth and hedge risk exposure. However, the shiny metal faces its last challenge near the 200-DMA after breaking to the upside the 50-DMA, and finally then 100-DMA. Hence, some profit-taking is expected and a $40 pullback down to $1210 should not be ruled out before the uptrend resumes.

Meanwhile in China

George Cassell at Platts News reported, "Chinese gold imports from Hong Kong totaled 32 mt in January, down 40% from December, data released by the Hong Kong Customs and Statistics showed Tuesday. The figure is down marginally from 33 mt reported in January 2016. Imports to the Chinese mainland totaled 771 mt in 2016, down from 861 mt in 2015." Hence, as China and India lead Gold consumption figures, traders and investors should pay close attention at their demand-production dynamics to have an idea as how far prices can move at least in the short term.

Gold maintains mildly positive bias ahead of US data and Trump

Historical data available for traders and investors indicates during the last 9-weeks that Gold spot had the best trading day at +1.41% (Jan.5) or 1664-pips, and the worst at -1.11% (Jan.18) or (1331)-pips.

Technical levels to watch

In terms of technical levels, upside barriers are aligned at $1263 (200-DMA), then at 1290 (high Nov.10) and above that at $1330 (high Nov.9). While supports are aligned at $1213 (100-DMA), later at $1190 (50-DMA) and below that at $1140 (low Jan.3).

On the other hand, Stochastic Oscillator (5,3,3) seems to change direction to head south. Therefore, there is evidence to expect Gold losses in the near term.

The greenback – gauged by the US Dollar Index seems muted 'at 50-DMA gates' which contributed to a sell-off across the board (this represents the 6th attempt during the last 10 trading sessions). However, the bullish tone hasn't been diluted as long as the buck holds 100.20 handle. Now, there is technical evidence to expect either a break above 101.60 or sell-off towards the 100-DMA near 100.20.

In term of technical levels, upside barriers are aligned at 101.40 (high Feb.23), then at 102.10 (high Jan.16) and above that at 102.40 (high Jan.9). Meanwhile, supports are aligned at 100.20 (100-DMA), later at 99.60 (low Feb.6) and finally below that at 98.54 (low No.11). On the other hand, once again, today's daily candlestick seems to print a red body, however, it could easily serve as a trap to squeeze short-sellers; further confirmation is required on a close.

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