- 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:
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD treads water just above 1.0400 post-US data
Another sign of the good health of the US economy came in response to firm flash US Manufacturing and Services PMIs, which in turn reinforced further the already strong performance of the US Dollar, relegating EUR/USD to the 1.0400 neighbourhood on Friday.
GBP/USD remains depressed near 1.2520 on stronger Dollar
Poor results from the UK docket kept the British pound on the back foot on Thursday, hovering around the low-1.2500s in a context of generalized weakness in the risk-linked galaxy vs. another outstanding day in the Greenback.
Gold keeps the bid bias unchanged near $2,700
Persistent safe haven demand continues to prop up the march north in Gold prices so far on Friday, hitting new two-week tops past the key $2,700 mark per troy ounce despite extra strength in the Greenback and mixed US yields.
Geopolitics back on the radar
Rising tensions between Russia and Ukraine caused renewed unease in the markets this week. Putin signed an amendment to Russian nuclear doctrine, which allows Russia to use nuclear weapons for retaliating against strikes carried out with conventional weapons.
Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.