Gold stays in a precarious spot, looks set for first January drop since 2013

New York (Jan 28)  Barring a monumental comeback over the next two days, that will see gold post a first January decline since 2013 - which wasn't a good year for the precious metal.

Despite the Fed reaffirming that it will maintain its current policy stance for an extended period of time, gold isn't quite taking heart from that as it follows the broader reaction in the market i.e. stronger dollar, weaker stocks.

As of late, gold has turned into more of a goldilocks trade whereby it requires a weaker dollar narrative and one that sees stocks not sell off too heavily i.e. requiring the market to focus on lower rates and negative yielding debt instead.

The drop in gold yesterday now calls into question a test of key trendline support from the March to November lows once again, seen at $1,835.92.

That will be the key level to watch ahead of the weekend, with further support seen around the region of $1,804 to $1,817 from the lows this month. But from a psychological perspective, the $1,800 level is one to be mindful about in case the squeeze runs further.

It is a testing time for gold, as the upside momentum has largely stalled since peaking in August last year.

However, the technicals still suggest that price isn't set for major squeeze to the downside just yet. That would require a push below the 30 November low @ $1,764.80.

That is the key line in the sand for gold buyers to try and maintain some form of a bullish outlook as the Fed sticks to its guns for the time being.

Another key area to watch is the divergence in real yields and gold that is taking place in the post-Fed market now:

Gold has generally tracked real yields for the most part in recent weeks and that could argue for some supportive factor, despite ETF flows keeping more subdued this week.