By Barani Krishnan
Investing.com - On a day when the dollar stank and there was neither threat from bond yields and the bitcoin nor inspiration from stocks, gold did the natural thing the safe haven crowd has come to expect of it these days: close lower.
Gold for February delivery on New York’s Comex settled at $1,850.90 — down $4.30, or 0.2%, on the day, extending Monday’s $1, or 0.1%, drop.
The benchmark U.S. gold futures contract has been in slow-mo mode since the week began, compared with the volatility of the past fortnight. February gold rose more than $26, or 1.4%, last week after losing almost 3.5% in the previous two combined.
The pedestrian moves since Monday may not be out of place as markets batten down their hatches ahead Wednesday’s monthly rate decision by the Federal Reserve, followed by the news conference of its Chair, Jay Powell.
But in reality, even the Fed might be a non-event for gold. Consider this: There’s a near 100% probability that the central bank will roll over for yet another month rates it has held at near zero for nearly a year since the outbreak of the pandemic. Chair Powell is also expected to issue the same dry, unexciting soundbites on bond buying and the virus’ track that markets are just waiting to check off on.
Yet, as uncertainty grows over the ability of President Biden to get his $1.9 trillion stimulus plan through Congress — what with Senate Republican fiscal hawk Mitch McConnell sounding familiar disapproving grunts at the idea after hearing dissent within the president’s own Democratic ranks — maybe the Fed is all that the gold crowd has.
“The next 24-hours could be very boring for gold traders if the precious metal is stuck between $1,845 and $1,865,” Ed Moya, analyst at OANDA, said, in what appeared to be the most profoundly true observation of the yellow metal’s behavior since the week began. He added that after this week, “risk appetite should have enough of a catalyst to send gold either to $1,800 or $1,900.”
Eric Scoles of BlueLine Futures in Chicago concurred.
“Gold is trading within a narrow range as pressure builds up in consolidation without bulls or bears taking charge,” said Scoles.
“I'm under the impression that there will likely be a breakout in the near future and my bias is still to the downside with the possible head and shoulders pattern still influencing technicals until some significant bullish event jumps into the spotlight.”