Gold Continues To Respect Support And Resistance

1. Gold Continues To Respect
Support And Resistance

2. Points To Be Covered Today:
• Gold Remains Rangebound
• Inflation Outlook
• Gold Trading Bias
• Gold Price Unchanged
• Gold Technical Forecast
• Gold Technical Analysis
• Gold Prices Pulled Back
• Gold Prices Are Testing Resistance

3. Gold Remains Rangebound
• Gold remains rangebound between two important Fibonacci retracement levels
produced from the March 16 2020 low at $1,451/oz. and the August 6, 2020 high at
$2,075/oz.
• Resistance at $1.837/oz. has held two recent breakout attempts while support at
$1,764/oz. has been untroubled of late.
• Adding to the current stalemate, all three simple moving averages are now clustered
together, giving little away as to the current sentiment in the market, while the CCI
indicator is neutral.
• Inside this box, there is additional support around $1,785/oz. which is underpinning
the short-term gold price.
• It will need a fundamental driver to break this current set up otherwise price action
will remain constrained going into the summer lull.

4. Inflation Outlook
• The US dollar continues to tread water ahead of this Friday’s US jobs report, a
monthly event that is closely watched by traders who continue to double
guess the Fed’s next move.
• While the inflation outlook – transitory or not – has been the main driver of the
US dollar over the last few months, Fed chair Powell recently reiterated the
central bank’s dual mandate of inflation and jobs, bringing this month’s jobs
report firmly into focus.
• Friday’s job’s release may well be the driver that gold needs to attempt a
range breakout.

5. Inflation Outlook - I

6. Gold Trading Bias
• Retail trader data shows 81.72% of traders are net-long with the ratio of traders long
to short at 4.47 to 1.
• The number of traders net-long is 3.32% higher than yesterday and 6.97% lower
from last week, while the number of traders net-short is 0.50% lower than yesterday
and 1.43% higher from last week.
• We typically take a contrarian view to crowd sentiment, and the fact traders are net-
long suggests Gold prices may continue to fall.
• Positioning is more net-long than yesterday but less net-long from last week. The
combination of current sentiment and recent changes gives us a further mixed
Gold trading bias.

7. Gold Price Unchanged
• The price of gold is largely unchanged this week despite a lackluster US
Dollar.
• Last week, gold prices rallied after Fed Chair Jerome Powell tempered
hawkish expectations for tapering later this year.
• The Fed Chief cited the labor market specifically, which seemed to imply that
for now, inflation data will be thrown to the wayside.
• That makes sense after months of driving home the transitory narrative. Now
that the markets appear to have capitulated on that view, Fed commentary is
more keenly focused on jobs.

8. Gold Technical Forecast
• Gold prices are trading closely below the 200-day Simple Moving Average
(SMA).
• An area of congestion, which has affected prices on both the support and
resistance side, appears to be proving a degree of support currently.
• A bullish move would need to clear the 200-day SMA before moving higher. on
the downside, a major level could be the psychologically imposing 1800 level.

9. Gold Technical Forecast - I

10. FOMC Monetary Policy Announcement
• Anti-fiat gold prices climbed over the past 24 hours following Wednesday’s FOMC
monetary policy announcement.
• The central bank left benchmark lending rates and the pace of quantitative easing
unchanged, as widely expected.
• The details of the statement, as well as Chair Jerome Powell’s press conference,
depressed the US Dollar and Treasury yields.
• When both the latter are falling, it tends to bode well for XAU/USD given that it is a
non-yielding asset.
• There was a kneejerk reaction to the Fed. Markets were initially spooked by the
statement as the central bank noted that the economy made progress to its
maximum employment and price stability goals.
• Policymakers noted that they are closer to tapering.

11. Central Bank Is Still Quite Dovish
• However, the mood quickly reversed course as it soon became clear that the
central bank is still quite dovish.
• Powell said that the labor market is ‘some ways off’ before reaching
substantial further progress.
• He reiterated that inflation is transitory.
• Treasury yields quickly turned lower as his commentary likely suggested that
tapering is still not quite around the corner just yet, opening the door to
optimal stock market conditions.

12. US Second-quarter GDP Is Due
• The first estimate of US second-quarter GDP is due over the coming 24
hours.
• Annualized growth is expected at 8.5% q/q from 6.4% prior.
• Atlanta’s Fed GDP Now Q2 real growth estimate has been notably trending
lower since April, currently standing at 6.4%.
• A softer-than-expected outcome could underscore the central bank’s
hesitation.
• If such a result depresses bond yields further, gold could continue benefiting.

13. Gold Technical Analysis
• Gold prices may be readying to extend recent gains after prices
recently pierced a near-term falling trendline from earlier this month
on the 4-hour chart below.
• This also follows positive RSI divergence, showing that downside
momentum was fading. Extending gains may see prices aim for the
July 15th high at 1834.
• That would also leave XAU/USD back above the 200-period Simple
Moving Average.

14. Gold Technical Analysis

15. Gold Prices Pulled Back
• Gold prices pulled back to $1,812 during Monday’s APAC session as traders
awaited the US nonfarm payrolls report this week.
• The DXY US Dollar Index rebounded to 92.09, exerting downward pressure
on the yellow metal.
• Technically, gold prices may be forming a “Double Top” pattern after failing
to breach the 1,835 resistance for a second try.
• Immediate support levels can be found at 1,790 (neckline) and then 1,784 –
the 61.8% Fibonacci retracement. The MACD indicator is flattening,
suggesting that bullish momentum may be fading.

16. Fed’s Dovish Stance And Weaken The US
Dollar, Buoying Gold Prices
• Minneapolis Fed President Neel Kashkari said Sunday that the Delta variant
could keep some Americans from looking for a job, potentially harming the
labor market recovery. This puts Friday’s nonfarm payrolls report under the
spotlight, where a 900k rise is expected. A big miss may strengthen the Fed’s
dovish stance and weaken the US Dollar, buoying gold prices.
• Viral resurgence around the world also puts a question mark over the global
economic recovery, with many countries re-imposing stricter social-distancing
measures amid the rapid spread of the Delta variant strain. This may delay
other central banks’ plan to scale back pandemic-era stimulus efforts,
brightening the prospects for precious metals.

17. Gold Price vs. Real Yields

18. Gold Prices Are Testing Resistance
• At this point, Gold prices are testing resistance inside of the 1833.66 Fibonacci
level. That price also constitutes the six-week-high, as well as being the 50% marker
of the June sell-off.
• Overtaking this level could be a key signal as a breach above the 50% retracement
indicates a degree of nullification to the June sell-off, which was the worst monthly
performance in the yellow metal since November of 2016.
• A break above this level could be big for multiple reasons, key of which is the fact
that the fresh six-week-high that would come about would also be a degree of
nullification of that June sell-off.
• Above current prices, the next big zone of resistance runs from 1853-1859, and
along the way there’s a prior swing-low at 1843.90 that can function as a more
short-term area of nearby resistance.

19. Gold Price

20. Gold Continues To Respect
Support And Resistance

21. Thanks for listening
Gold Continues To Respect Support And Resistance