Gold Violates Double Top Level – Is it Going After $1,828? - Forex News by FX Leaders

Gold Violates Double Top Level – Is it Going After $1,828?

Posted Thursday, July 8, 2021 by
Arslan Butt • 4 min read

During Thursday’s Asian trading session, the price of the yellow metal failed to maintain its previous six-day uptrend, falling below the $1,800 level, as the downbeat market sentiment put a safe-haven bid under the US dollar. This was one of the key factors that kept the GOLD price under pressure, mainly due to its inverse relationship with the dollar. Furthermore, the upticks in the US dollar were further bolstered after the minutes of the Federal Reserve’s June policy meeting confirmed that the world’s largest central bank is inching towards tapering its asset purchases during 2021. On a different page, the number of coronavirus (COVID-19) cases has picked up pace in major countries recently, and this keeps weighing on the market trading mood.

The intensifying geopolitical tension in the Middle East and the Sino-American tussle put some additional pressure on the market trading mood. As a result, the downbeat market sentiment could help to limit deeper losses in the safe-haven GOLD prices. Besides this, the drops in the gold prices were also capped by World Health Organization (WHO) official Mike Ryan’s warning against reopening too early after Covid lockdowns. Shares in Facebook and Twitter dropped, due to the announcement that Donald Trump is once again using the tech giants. Previously, the former President of the United States was banned from these social media platforms, following January’s riots in Capitol Hill. At the time of writing, the yellow metal prices were trading at 1,797.8, and consolidating in a range between 1,796.36 and 1,805.62.

 

GOLD

Covid Woes & Geopolitical Tension

Despite the previous progress in the US economic recovery, the market trading sentiment failed to maintain its previous positive performance, becoming depressed on the day, as renewed fears of a resurgence of COVID-19 in some major countries, including the US and the UK, keep weighing on the market trading sentiment. As per the latest report, the incidence of coronavirus (COVID-19) cases has recently spread out from the Asia-Pacific region, after the United Kingdom reported the highest number of daily covid infections since late January. Meanwhile, the US has recorded a fresh variant, Epsilon, in California, that is resistant to vaccines, South Korea has recorded an all-time high in the number of cases and Tokyo is also set to extend the virus-led state of emergency until late August.

Australia’s Health Expert, Catherine Bennett, also said many more Australians need to be vaccinated before states and territories can even consider doing away with lockdowns to control outbreaks. The number of COVID-19 deaths exceeded the 4-million figure as of July 8. As a result, Atlanta Fed President Raphael Bostic recently warned that the new increase in the number of coronavirus cases, driven by the more virulent Delta variant, could cause consumers to “pull back” and slow the US recovery.

In addition to this, the sluggish trading mood could also be attributed to the intensifying geopolitical tension in the Middle East and the never-ending tussles between China and the US. Meanwhile, the shares in Facebook and Twitter dropped on the day, due to the announcement that Donald Trump is once again using the tech giants. The former President of the United States was banned from these social media platforms after the January riots in Capitol Hill, which he was accused of inciting. This turned out to be another critical factor that kept the market trading sentiment under pressure. Thus, the prevalent risk-off mood has put a safe-haven bid under the US dollar, which was seen as one of the key factors that kept the gold price under pressure, due to the inverse relationship between the price of gold and the price of the greenback.

Indecision Over Central Bank Measures

The minutes of the Fed’s June meeting suggest that the central bank will be tapering its asset purchases during 2021. Although Fed officials estimated that valuable progress in terms of economic recovery in the US “was generally seen as not having been reached yet,” they agreed that they needed to start preparing, should asset tapering be required sooner than expected.

US Dollar & Gold

On the USD front, the broad-based US dollar succeeded in maintaining its early-day winning streak and took some fresh bids, as the market risk-off mood tends to underpin the safe-haven assets, including the American currency. In addition to this, another reason for the bullish US dollar could also be associated with the recently released minutes of the Federal Reserve’s June policy meeting, which confirmed that the world’s largest central bank is moving towards tapering its asset purchases as soon as this year. Therefore, the prevalent upticks in the greenback were seen as one of the key factors that kept the price of the precious metal lower, due to its inverse relationship with the dollar.

Looking forward, the market traders will keep their eyes on the release of the weekly US Jobless Claims. In addition to this, the market traders will pay more attention to the European Central Bank’s (ECB) Special Meeting, as policymakers jostle over the inflation target. In addition to this, the trade/political headlines will also be closely observed.

Gold – XAU/USD – Daily Support and Resistance

S3 1,777.75
S2 1,790.64
S1 1,797.18
Pivot Point: 1,803.53
R1 1,810.07
R2 1,816.42
R3 1,829.31

Gold – XAU/USD – Technical Analysis

The precious metal, gold, is trading with a neutral bias at 1,798, having violated the double top resistance level of 1,795. For now, this level is extending support to gold, and the odds of a continuation of the bullish trend remain high over the 1,795 level. As we can see on the 4-hour timeframe, the MACD has crossed over the 0 level, suggesting a strong bullish trend in GOLD. But at the same time, the RSI is in the selling zone. Moreover, gold is likely to close a tweezer’s top pattern on a daily timeframe. If this happens, the odds of a bearish correction could remain high. Today, let’s keep an eye on the 1,803 level to capture a sell trade, and buying could be seen over the same level. Good luck!
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