The World Health Organization stated that the Omicron variant virus has spread around the world. Countries such as the United States and Europe may impose more restrictions on economic activities. The worsening of the epidemic may affect the global economy in the new year, thereby increasing risk aversion in the market. 

In addition, the market focus on inflation in the United States. When Fed Chairman Powell also believes that inflation is not temporary, the data shows that the CPI in November set the fastest growth rate since 1982, and the index rose by 6.8% year on year. It became a factor supporting the price of gold recently. 

Although the spread of the Omicron variant virus and the inflation problem in the United States have pushed up gold prices, it is still necessary to be wary of Fed officials' hawkish remarks. According to the Fed’s interest rate decision in Dec, it announced that the monthly rate of reduction of asset purchases has increased to 30 billion U.S. dollars and believes that the Interest rate will increase three times in the coming year. This would be a big opportunity to boost the US dollar, which may suppress the price of gold to a certain extent. 

Up to December 22, gold was mainly traded in the vicinity of 1,760-1,800 US dollars. Since the beginning of December, it has been volatile, and there was no obvious downward momentum. However, on 16th Dec, the day of the FOMC decision, the price of gold dropped to 1,760 and then rebounded, proving that there was buying below. In addition, from the candlestick pattern, it can be judged that there was also the above 1,810 pressure, forming long and short stalemate. It seems that it will take some time to have another chance to rise to 1,830. At that time, we must pay attention to whether it will meet resistance and fall again. 

Figure 1 clearly shows that the bottom has formed short-term bottom support. As the bottom is a flat bottom, expected to test 1,830 upwards and then break down. Another view is that there is currently a head and shoulders pattern, as shown in Figure 2. If the pattern is established, the market can break the support platform directly without a backtest to 1,830. let’s wait and see the response from the market. Personally, if you prefer Gold, you can first oscillate and backtest 1,830. The reason is that the previous turbulence has been unable to fall for a long time and there is a bottoming and rebounding force. It is technically necessary to pull back up to digest part of the seller's momentum.

Hugo Leong Gold Analyst of Hantec Group