Gold held steadily during Monday’s APAC session after gaining 1.6% over the past week. A slew of upbeat economic data bolstered risk sentiment, defying fears about the negative impact of the Omicron variant on economic recovery. This may limit the upside potential for the yellow metal, which is commonly viewed as a safe haven asset.

Japan’s core machinery orders, a leading indicator of capital spending, surged 11.6% YoY in November. This compared to a 6.1% estimate. The reading reflects an encouraging sign that private firms are spending and the broader economy is recovering at a faster-than-expected pace.

Chinese GDP expanded at 4.0% in the fourth quarter, beating economists’ forecast of 3.6%. industrial production grew at 4.3%, compared to a 3.6% estimate. Retail sales trailed behind consensus, however, coming in at 1.7% YoY. Nonetheless, the overall picture shows that the world’s second and third-largest economies are in a good shape of recovery, although the roadmap remains bumpy due to the lingering effects of the pandemic.

Economic Calendar

Source: DailyFX

The DXY US Dollar Index is flat during Monday’s APAC trade, offering a little clue about gold. The US markets are shut for a holiday on Monday, so trading volume may be lighter than usual. Gold prices are negatively correlated with the US Dollar. Their past 12 months of performance are highlighted below.

Investors have weighed the outlook for tightening monetary policy as US inflation rates run into four-decade highs. Although gold is perceived as a good inflation hedge, rising interest rate expectations have limited upside potential. This is because gold is a non-yielding asset, and it is likely to lose its appeal to investors in a rising interest rate environment.

Gold Prices Vs. DXY US Dollar Index – Past 12 Months

Source: Bloomberg, DailyFX

Technically, gold prices remain in a range bound set up, waiting for fresh catalysts. Prices pulled back from an immediate resistance level of 1,834 (38.2% Fibonacci retracement), eyeing 1,809 (50% Fibonacci retracement) for support. Moving average lines are flattening, indicating a lack of clear direction in the near term. The MACD indicator is trending up, suggesting that upward momentum maybe building.

Gold - Daily Chart

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