- Gold reaches a fresh cycle-high for which means profit-taking risks are abundant.
- The bears will need to see a convincing retest and rejection below the new support structure to seriously engage.
The price of gold has extended its rally at the start of the week, en-route to the said Fibonacci expressed in the following start of the week analysis: Gold Price Analysis: Risks in potential short-term shakeouts of positioning
The $1,820s could be a tough nut to crack and will test the committedness of the speculative bulls.
The bullish playbook for gold
There are two sides to the bullish playbook for gold.
Uncertainty related to the coronavirus spread in the US and another hard-hit area of the world has driven a safe-haven bid into the precious metal.
At the same time, there are arguments for inflationary prospects longer term that have been supporting flows into gold.
In more recent weeks, we have seen the US dollar lose its allure which is also playing into the hands of the gold bulls.
The DXY has been treading water on a critical support area, but the price action is adding up towards confirmation of a bearish bias at this juncture.
So long as the old support which turns resistance on a retest proves too tough a barrier to break, we could see the makings for a fresh bearish daily impulse hit the charts in coming days.
However, what we lack is a catalyst with the Federal Reserve blackout ahead of the forthcoming interest rate decision on July 28th/29th and next week's Gross Domestic Product.
Instead, equities will be a focus amid this week's earnings reports, with a particular eye on the NDX and whether it can hold around record highs.
Alternatively, it will be equally bearish for gold should there be a spillover on profit-taking in the NDX that will go towards seeing fresh recovery highs in the S&P 500 and DJIA.
Conversely, a surge in US Covid-19 cases and geopolitical tensions could be the nail in the coffin for risk appetite and see to capitulation in the stock markets leading to the next round of safe-haven flows into gold.
On the other hand, analysts at TD securities pointed out that speculative positioning in gold, while not extreme, has begun to bloat, "which increases the risk of potential short-term shakeouts of positioning, should the macro outlook begin to change."
Gold levels
As per yesterday's price analysis, the bears will need to see a retest of the following support structure before committing to a bearish outlook from a technical perspective:
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