Here's how to trade Gold on February 19; Check support, target and more

Gold – Sharply up even as the US Dollar and yields rise

 

Performance: Up for the second day

 

Spot gold traded between $2900 and $2937 on February 18. Notwithstanding higher yields and a firmer US Dollar, the metal rose for the second day; thus, extending its recovery from Friday's sell-off. The metal rallied as the US NAHB Housing Index data disappointed and economic concerns due to Trump's tariff plans continue to linger. Renowned investment banks upgrading possible upside targets also helped the metal to settle with a daily gain of 1.24 per cent at $2935, the highest level ever.

  Geopolitics watch

 

Top US and Russian officials met in Riyadh, Saudi Arab, to discuss the course of peace process to bring Russia-Ukraine war to an end. The discussion did not include Ukraine though. Both the sides pledged to appoint high-level teams to achieve the peace objective as soon as possible. US Secretary of State Marco Rubio indicated that the two sides will prepare to restore staffing at their respective embassies. The two sides also agreed on laying the groundwork for future cooperation on matters of mutual geopolitical interest once the war ends.

 

Data roundup 

US NAHB Housing Market Index (February) fell from 47 in January to 42, a five-month low, and trailed the estimate of 46.

 

The UK's labour report was solid as unemployment rate came in at 4.4 per cent (forecast 4.5 per cent) in Q4 and earnings accelerated at the fastest pace in eight months. Wages excluding bonuses jumped 5.9 per cent in Q4 2024 from a year ago level. The number of payrolled employees rose 21K (forecast -30K) in January. Traders have pared down expectations for BoE rate cuts following the data.

  Germany's ZEW survey expectations (February) came in at 26, the best reading since July 2024, as against the forecast of 20. Even the Eurozone's ZEW survey data showed an improvement over the prior data.

 

US Dollar and yields

 

The US bonds followed their European peers lower as the latter fell on the notion that after the US backing out from the coalition, European nations will have to shore up funding to meet defence and reconstruction efforts.

 

The ten-year US yields settled at 4.55 per cent, the highest since February 12, and were up nearly 1.7 per cent on the day. The two-year yields at 4.306 per cent were up by over 1 per cent.

 

The US Dollar Index rose to 107.05, a three-day high, as yields shot up, and was up around 0.45 per cent on the day.

 

Fedspeak

 

Federal Reserve Governor Christopher Waller said that that rates will likely stay on hold for now due to prices; however, if going ahead inflation subsides like last year, rate cuts will happen. Patrick Harker, the Philadelphia Fed President said that he remains optimistic that inflation will continue a downward path and the policy rate will be able to decline over the long run. Federal Reserve Bank of San Francisco President Mary Daly said policy needs to remain restrictive as more progress on inflation is required, though she expects that inflation will continue declining over time.

 

Upcoming data

 

Today's US data include net long-term TIC flows and housing starts (January). Traders will look forward to FOMC minutes (January 29 meeting), too.

 

Major European data include UK CPI (January). China will release its new and used home prices data (January).

 

Upcoming events

 

The Reserve Bank of New Zealand is expected to deliver a 50-bps rate on Wednesday, while Indonesia's Central Bank is expected to hold rates at 5.75 per cent as it opted for a rate cut a its last meeting. China's commercial banks are likely to keep one-year and five-year Loan Prime rates unchanged at 3.1 per cent and 3.6$ respectively.

 

Gold ETF holdings

  Total known global gold ETF holdings stood at 83.673 MOz, up around 1 per cent this year. The ETF holdings have been up for three straight weeks, which is a positive sign for the yellow metal.  

 

Outlook

 

Disappointing data out of the US viz retail sales, nonfarm payroll (considering the downward revision done by BLS) and NAHB housing Index are positive for the yellow metal.  Delivery related squeeze at COMEX, as seen in the rising COMEX inventory that has more than doubled since Trump’s victory in the US presidential election, continues to drive the metal prices up. At the same time, stretched valuation concerns amid firmer yields are likely to act as headwinds. Overall, the metal is still likely to rise to $3000 (Rs 88,000 - MCX April contract) in the near term. Support is at $2900 (Rs 85,100) /$2875 (Rs 84,400). Resistance is at $2945 (Rs 86,400).

  (Disclaimer: Praveen Singh is an associate VP of fundamental currencies and commodities, Mirae Asset Sharekhan)