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Gold extended modest gains for the 3rd week after bouncing off a 28-months low at 1680 and bulls are challenged by the 1800 level. The global recession fears continue to favour gold bids in the near term amid hot inflation figures.
The yellow metal was slightly down by -0.32% on Friday ahead of the US Jobs data. The Non-Farm payroll is expected to drop from a previous 372K to 250K in July and a disappointing outcome could lift gold bulls in the near term.
The US 10-year yield rallied by +0.41% alongside DXY recovery by +0.19% ahead of the Non-Farm Employment Statistics. Global stocks took a hit as risk-on sentiment faded indicating investors’ cautious stance ahead of the eventful day.
Investors will closely watch the US inflation data print due for release next Wednesday, 10 August, as the main gauge for the Fed rate cycle. Fed Chairman Powell indicated that the Fed would not provide forward guidance for the market but rather inflation and labour market data will be the main determinants of how aggressive the Fed will tighten.
Intermediate-Term Analysis – Weekly Chart
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Gold rallied for the 3rd week straight and a bullish break above the 1840 level coinciding with a 50-day moving average could reinforce a bullish outlook towards the 2070 level. The yellow metal has been trapped inside a 28-month range between 2070 resistance and 1680 support. A break above 1840 and 1880 will be key for gold to rally towards the 2070 level.
However, a failure to break above the 1840 level could trigger selling pressure towards 1680, a level coinciding with a 200-day moving average. Bears remain in control below 1840 and a break below 1680 could trigger further downward pressure.
ActivTrader sentiment tool indicates that 61% of retail traders are bullish on Gold. China’s retaliation to US House Speaker Nancy Pelosi’s visit to Taiwan has caused gold to rally on the heightened geopolitical tensions between Washington and Beijing. China slapped Pelosi and her immediate family members with sanctions early Friday morning as an indication of widening tension from her act of defiance against China.
However, gold remains under bearish weakness as Fed members refute the sentiment of a pivot on the interest rate cycle. A further tightening could cap gold’s bullish gains as money moves into interest-paying assets. Friday’s US Jobs data will be a key factor in shaping the outlook in the near term.
Short-term Analysis – H4 Chart
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Gold opened slightly lower on Friday as bulls are faced with a near-term barrier at the 1800 level. A break above that high could cause buying pressure towards the 1840.00 level. Price is currently trading above both the 50-day and 200-day moving average suggesting bullish momentum above the 1750 level. The RSI reading is also trading slightly below the 70level suggesting that the trend hasn’t reached an exhaustion level and further upside movement could be experienced in the near term.
However, if the price trades back below the 1750 level, immediate support, bears may regain control and downside pressure could be experienced. Bears may target the 1680 level if the 1720 and 1700 levels fail to hold.
