Gold Bounces off 1,793 Support – Eyeing 1,830 Resistance
During Tuesday's Asian trading session, the safe-haven-metal price stopped its previous-day downward rally and took some fresh bids around
Arslan Butt•Tuesday, July 20, 2021•3 min read
During Tuesday’s Asian trading session, the price of the safe-haven metal stopped its downward rally of the previous day, taking some fresh bids well above the $1,819 level. The surging incidence of COVID-19 cases has triggered a wave of risk-off sentiment globally, which tends to underpin the safe-haven, gold.
Risk-off Sentiment Pushes the Gold Price Over $1,800
Investors are getting nervous about a new coronavirus variant that could threaten global economic recovery. Besides this, the bullish bias surrounding the GOLD prices could also be tied to the escalating US-China tussle, which is still not showing any signs of slowing down. The United States has taken a firm stand against China over various issues regarding human rights and trade.
The US dollar hit its highest level in over three months against its major rivals, as a mounting wave of new COVID-19 cases globally has raised doubts over the sustainability of the global recovery.
This turned out to be one of the key factors that kept a lid on any additional gains in the precious metal, as the price of gold is inversely related to the price of the US dollar.
In contrast to this, Sydney has recorded the lowest numbers of new coronavirus infections in three days, and Australia’s Health Minister, Greg Hunts, has tweeted that one million doses of Pfizer vaccine will arrive in Austria every week. This is probing the risk-off market sentiment and capping any further gains in the yellow metal prices. At the moment, the gold price is trading at 1,816.74 and consolidating in the range between 1,810.84 and 1,819.23.
Delta COVID Variant Underpins Safe-haven Metal
Despite some positive headlines, the sentiment on the global market became depressed during the second half of the Asian session, as the tumultuous spread of the coronavirus Delta variant threatens the outlook for global economic recovery, keeping the market trading sentiment under pressure.
The Delta variant of COVID-19 is becoming the dominant strain across the globe. As a result, South Australia has imposed a fresh seven-day lockdown, and Victoria has also extended activity restrictions for another week. The lockdown in Sydney will cost approximately $220 million a day, and the lockdown in Victoria will cost close to $150 million a day. Over the expected lockdown period, the total cost will be close to $10 billion.
US-China Tussle – Investors Switching to Safe Haven Assets
The tussle between the United States and China has picked up further, as the
US alleges that China was involved in the recent cyber attack. Furthermore, the United States has taken a strong stand against China over several human rights and trade issues. This has had a bearish impact on the market trading sentiment. The negative appearance of the US stocks futures highlights the risk-off sentiment, which benefits the dollar-denominated commodity, gold.
Stronger US Dollar Fails to Make Gold Bearish
The broad-based greenback hit its highest level against major peers in over three months. The rising wave of COVID-19 cases across the globe raised doubts over the sustainability of the global recovery, which tends to underpin the safe-haven US dollar.
The US dollar has come off its highs, while the Yen and the Swiss Franc have gained, amid the worsening risk sentiment. The American currency remained higher against risk-sensitive currencies such as the Australian, New Zealand and Canadian dollars. Therefore, the upticks in the US dollar were seen as one of the major factors that placed a lid on any additional gains in the GOLD prices, due to the negative correlation between gold and the greenback.
Today, the US housing numbers will be crucial for traders. Apart from this, the COVID updates and other risk-related headlines will remain in focus for fresh direction. Lastly, the price movement of the US dollar will continue to play a vital role in the movement of gold.
Gold – XAU/USD – Daily Support and Resistance
S3 1,766.56
S2 1,787.17
S1 1,799.88
Pivot Point :1,807.77
R1 1,820.49
R2 1,828.38
R3 1,848.98
On Tuesday, trading in the precious metal, gold, is bullish at the 1,815 level, having bounced off over the support level of 1,793. On the higher side, the yellow metal is still facing immediate resistance at 1,831, extended by a downward trendline on the 4-hour timeframe.A bullish crossover at the 1,7831 level could extend the buying trend until 1,845 and 1,865. Conversely, the 50
EMA (green line) would support the
gold prices at the 1,812 level. Below this, the precious metal may find support at the 1,793 level today. Good luck!
Arslan Butt
Index & Commodity Analyst
Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics.His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker.His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.
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