Gold Sideways Trading Continues – Brace for a Breakout - Forex News by FX Leaders
Gold - XAU/USD Chart

Gold Sideways Trading Continues – Brace for a Breakout

Posted Thursday, July 1, 2021 by
Arslan Butt • 4 min read

During Thursday’s Asian trading session, the safe-haven-metal price managed to stop its bearish early-day performance, drawing some fresh mild bids above the $1,775 level. However, the buying trend surrounding the yellow metal prices was mainly supported by the worries over new coronavirus infections and fresh lockdowns, which are probing the optimism in the market, and contributing to the gains in the safe-haven metal. Moreover, the GOLD prices were further bolstered after US President Joe Biden urged for stricter controls over the large enterprises. At the same time, his Chinese counterpart, Xi Jinping, repeated his aim for the “One China” policy, with respect to Hong Kong and Macau. Apart from this, Australia has been struggling with virus variants, with 80% of Australia facing local lockdowns.

Meanwhile, Indonesia has declared a national emergency from July 02-20, due to the resurgence of COVID-19. This, in turn, has exerted a downside impact on the market trading sentiment and helped the safe-haven metal to put a safe-haven bid. Despite these negative factors, the market trading sentiment extended its positive performance of the previous session, backed by a combination of factors. This turned out to be one of the key factors that kept a lid on any additional gains in the safe-haven metal. In addition to this, the gains in the bullion price were also restricted by optimism over economic recovery in the US, while the bullish bias in the broad-based US dollar, backed by the upbeat US data, was seen as another factor that capped any further gains in the gold prices. At the time of writing, the precious metal was trading at 1,776.86, and consolidating in the range between 1,765.78 and 1,776.88.



Impact of COVID-19 Continues

Despite the escalating coronavirus (COVID-19) fears, and worries over the long-lasting US-China tussle, the market trading sentiment extended its positive overnight performance. It remained on the front foot, up by 0.20% at around 4,297, during the second half of the Asian session.

ADP Employment Change

The reason could be tied to a combination of factors. Be it the upbeat figures of the US ADP Employment Change and the Chicago Purchasing Managers’ Index or positive comments by the Fed policymakers, not to forget earlier optimism surrounding US President Joe Biden’s infrastructure spending plan – everything has supported the market trading sentiment. Elsewhere, Dallas Fed President Robert Kaplan confirmed his hawkish stance, saying: “I’d want to taper sooner than the end of the year.” However, the prevalent buying bias surrounding the market trading sentiment was understood as a key factor that kept a lid on any additional gains in the gold prices.

Japan’s Manufacturing Activity

On the data front, Japan’s manufacturing activity numbers, as per the Tankan survey, showed an upbeat scenario during Q2, while China’s Caixin Manufacturing PMI eased in June. In the meantime, the US data showed that US private payrolls grew more than expected, by 692,000 jobs, in June. This data raised hopes over global economic recovery and helped the market trading sentiment to ignore the fears of the Delta Plus variant of the coronavirus (COVID-19).

Despite the upbeat market sentiment, the broad-based US dollar succeeded in extending its previous bullish bias and hit a fresh 15-month high on the day. The greenback was being supported by the upbeat US data, which boosted confidence regarding economic recovery in the USA.

The monthly data published by the Automatic Data Processing (ADP) Research Institute showed that employment in the US private sector grew by 692,000 in June. These figures came in better than the market expectations of 600,000. Besides this, the escalating coronavirus (COVID-19) fears also put a safe-haven bid under the US dollar. The prevalent upbeat market mood, backed by multiple factors, failed to undermine the safe-haven US dollar. Thus, the bullish sentiment surrounding the greenback was seen as a significant factor that kept the gains in the gold price in check, as the price of gold is inversely related to the price of the US dollar.

On a different page, the escalating coronavirus (COVID-19) concerns in the Asia-Pacific region, and concerns over the long-lasting Sino-US tussle, keep challenging the market risk-on mood, which was viewed as one of the key factors that boosted the gold prices. On the US-China front, the tension between the US and China picked up further pace after President Joe Biden urged for stricter controls over the large companies. At the same time, Chinese President Xi Jinping repeated his aim to practice the “One China” policy, which affects Hong Kong and Macau. This could provide extra support to the bullion prices.

With regard to Covid-19, Australia has been facing major difficulties in the control of virus variants. The country has imposed local lockdowns for 80% of the population. Meanwhile, Indonesia has declared a national emergency from July 02-20, due to the resurgence of the virus. Besides this, the UK recently recorded the highest number of cases in 2021.

Moving on, the market traders will keep their eyes on the US ISM Manufacturing PMI for fresh direction, as the latest US numbers favor strong jobs reports and a challenge to the Fed’s easy money policy. In addition to this, the traders are also looking to Friday’s US non-farm payrolls report, for confirmation of that outlook. Besides this, coronavirus headlines and trade/political jitters will also keep the markets on their toes.


Daily Support and Resistance

S3 1,723.85
S2 1,744.97
S1 1,757.63
Pivot Point: 1,766.09
R1 1,778.75
R2 1,787.21
R3 1,808.33

Gold -XAU/USD – Technical Outlook

GOLD is trading sideways at the 1,779 level, facing immediate resistance at 1,793, along with a support area of 1,764. A bearish breakout at 1,793 could lead the GOLD price towards the 1,825 resistance level, while the support level remains at 1,755 and 1,730. The 50 periods EMA suggests a continuation of a bearish bias in gold. However, gold has come closer to the 50 EMA resistance area, at the 1,788 level, and a bullish crossover could extend the selling trend in gold until 1,814. Conversely, the support remains at 1,764. Good luck!
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