Good morning, traders, 

 GOLD prices closed on 1,900.65 after placing a high of 1,906.52 and a low of 1,881.27. Overall, the movement of gold remained bullish throughout the day. The gold price maintained its bullish streak for the 6th consecutive day, rising above the 1,900 level on Friday, for the first time in nine years. The yellow metal topped the seven-week long rally, backed by the assurances of more stimulus measures worldwide, to fight the effects of the coronavirus.

Gold prices have gained nearly 24%, on the back of low-interest rates and trillions of dollars of COVID19 stimulus packages passed by governments and central banks. This has debased the dollar and other currencies, raising fears of inflation – and this typically encourages investors to hedge and buy gold.

The US Congress has passed three coronavirus stimulus packages worth $ 3.3 trillion and is debating a 4th one, at a projected $ 1 trillion-plus. Apart from this, the Federal Reserve has formulated loans and other market and economic support programs, worth hundreds of billions of dollars, in order to offset the negative effects the coronavirus has had on growth.

Meanwhile, earlier this week, EU leaders agreed on a historic 750 billion euro stimulus, in an effort to rescue their pandemic-weakened economies. This also pushed gold prices to record highs. The strength of gold has also been supported by the weakness of the US dollar this year. The US dollar index, which measures the greenback’s performance against the basket of six currencies, has dropped from a 17-year high of 103.96 in March to below the 95 level – the lowest in almost two years.

The fall in the US dollar is likely to persist for a prolonged period, as negative real rates in the US make the EU rally or a growth rally a lot more attractive, raising the commodity currencies across the board. This means that gold is not the only commodity to gain on the back of the weak dollar and this year’s stimulus programs. Silver has also gained more than 26% this year, outperforming gold.

On the US-China front, the two super-powers each ordered the closure of the other country’s consulates in Houston and Chengdu last week, amid allegations of espionage. And besides this, US Secretary of State Michael Pompeo called for an end to “engagement,” a policy that has defined US-China relations for nearly five decades. The policy is considered as the most important foreign policy achievement by the Republican establishment in recent history.

This raised fears of further escalation in the US-China dispute, that could lead to a cold war. The safe-haven appeal has increased as a result, and gold added to its gains on Friday, crossing the $1,900 mark. Furthermore, the Flash Manufacturing PMI from the US, which was released on Friday, showed a drop to 51.3 in July from the anticipated 52.0, weighing on the US dollar on the data front. The Flash Services PMI also fell short of expectations, dropping to 49.6 from the expected 51.0, and this also weighed on the US dollar. The weak US dollar added further to the gains of gold on Friday.

Daily Technical Levels

Support Resistance

1902.551 1915.26

1894.43 1919.93

1889.79 1928.01

Pivot point: 1907.18

The gold price is making history, having hit an all-time high at around 1,944, before retracing to trade at the 1,931 level, and it has the potential to drop further, until the 1,925 level, to complete its retracement. The recent closing of the hourly candle signifies that the bulls are exhausted, and we might see selling in gold today. Good luck!