Gold may test USD 1280‐1300 ahead of the ECB meet

London (Jan 15)   FXStreet Editor and Analyst, Omkar Godbole, anticipates that Gold might test USD 1280-1300 ahead of the ECB meet, with rising pressure in bonds ahead of next week’s ECB meet expected to support Gold prices.

Key Quotes

“Gold has gained almost 2% today to trade above the 200‐DMA located at USD 1254/Oz levels after the Swiss National Bank surprised markets by announcing an end to a 4‐year long EUR/CHF cap at 1.2 levels.”

“More importantly, the SNB pushed the interest rate further down by 50 basis points to ‐0.75%. The decision to abandon the EUR/CHF floor and push interest rates to the negative territory indicates a big move is expected from the European Central Bank next week.”

“The race for looser monetary policy across Europe has pushed the yields on short to medium term government bonds into negative territory.”

“Asia has already seen its share of interest rate cuts and QE since Oct 2014. Consequently, Japan also has negative yields till 4‐year bonds.”

“Overall, the action in the bond markets indicates ECB QE is a done deal, while the SNB’s decision today has triggered speculation that the ECB would come out with a big QE program next week.”

“Thus, bond yields are likely to remain under pressure across Europe ahead of the next week’s ECB meet, which is supportive for Gold prices.”

“Gold prices are likely to test USD 1280‐1300.Oz levels ahead of the next week’s ECB meet. Moreover, a daily close above the 200‐DMA located at USD 1254 levels shall also bring in technical buying in Gold.”

Source: FXstreet