Brent oil hit $70 a barrel for the first time since December 2014. Will it have a positive impact on gold? Let the 12 January Gold Price Technical Forecast explain.
12 January, GKFX– As per textbook rules, oil price rally boosts inflation expectations, thus leading to higher demand for gold (inflation hedge).
- Higher oil prices both boon and curse for gold.
- Oil rally could boost inflation (good for gold), but
- Could also force central banks to quicken policy tightening (negative for gold).
However, a sharp rise in oil could also force the central banks to quicken the pace of policy tightening. Central banks with NIRP (negative interest policy) like the ECB and BOJ risk falling behind the curve and hence may tighten the screws sooner than later.
This may hurt the zero-yielding safe-haven metal. Also, oil rally usually keeps the risk assets (equities) well bid, thus keeping investors away from gold.
Both oil and gold have rallied sharply since mid-December. As of writing, gold (XAU/USD) is trading at $1325 levels and Brent oil is hovering at $69 levels. The outlook for gold depends on how the major central banks react to rising inflation expectations due to higher oil prices.
12 January Gold Price Technical Forecast
A move above $1327.78 (Jan. 10 high) would open up upside towards $1337.34 (November 2016 high) and $1357.55 (September 2017 high). On the downside, breach of support at $1322 (session low) would expose $1318.60 (10-day MA) and $1315.60 (1-hour 200-MA).
This article “12 January Gold Price Technical Forecast” was written by analysts at GKFX. The information provided herein is for general informational and educational purposes only. It is not intended and should not be construed to constitute advice.
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