Gold can be bought from every bearish level. 

The price of gold extends its gains with the weakness of the US dollar index DXY, and mixed Treasury yields as markets start in August in the red. The price of XAU/USD gold moved towards the resistance level of 1775 dollars for an ounce, the closest point to the psychological resistance of 1800 dollars an ounce. All in all, gold prices are looking to extend their gains after posting a weekly gain of 4% last week. Coinciding with a weak US dollar, mixed Treasury yields, and a drop in stocks, this could be a major opportunity for the precious metal.

Despite the strong weekly consolidation, the price of gold fell 2% in July and is down about 3% YTD 2022. In the same way the price of silver, the sister commodity to gold, is also trying to keep the winning streak alive. The price of silver rose to 20,265 dollars an ounce. Overall, the white metal enjoyed a 10% increase last week and a 2% monthly jump. However, silver prices are still down more than 13% YTD 2022.

Metal commodities are benefiting from so-called Fed pressure. This means that gold and silver could rise in the direction of the US central bank, which is likely to pivot in tightening efforts. Next year, Federal Reserve Chairman Jerome Powell may slow down the pace of US interest rate hikes and may cut rates to support economic growth in late 2023. Analysts also note that gold and silver jumped on money managers who covered their short positions after initiating a net sell for the first time since 2019.

Commenting on this, Daniel Ghaly, commodities analyst at TD Securities, told MarketWatch: “Money managers cover short positions across gold and silver, but in gold you have another group taking the other side, while in silver it is not.”

All in all, industry watchers note that gold and silver are in oversold territory, so it is possible that the two metals could regain some lost ground. Meanwhile, the metals market is also climbing with lower gains and a declining bond market. Take a look at the drivers of the gold market. The US Dollar Index (DXY), which measures the performance of the US currency against a basket of currencies, fell to 105.51, from an opening at 105.90. The index fell more than 1% last week but rose about 0.4% in July. And from the beginning of 2022 to date, the US index is still up by about 10%.

A lower exchange rate is a good thing for dollar-priced goods because it makes them cheaper to buy for foreign investors.

What else affects the gold market?

The US Treasury market was mostly mixed as the week’s trading opened, with the benchmark 10-year bond yield dropping 1.3 basis points to 2.629%. One-year bond yields were flat, while the 30-year bond yield was also unchanged. Lower Treasury yields are bullish for gold because they reduce the opportunity cost of holding non-yielding bullion.

In addition, the spread between the two-year and 10-year returns is still hovering around -27 basis points.

For other metals, copper futures fell to $3.5375 a pound. Platinum futures were up $11.30, or 1.27%, to $901.10 an ounce. Palladium futures advanced to reach $2,177.50 an ounce.

Today’s XAU/USD Gold Price Forecast:

On the daily chart below, the recent gold price gains contributed to breaking the bearish trend, and the shift will be to the upside if the XAU/USD price tests the psychological resistance level of $1800 an ounce. We expect that the stability of the gold price above the resistance level of 1780 dollars an ounce will support the move to that psychological resistance. Global geopolitical tensions, as I mentioned before, may remain supportive of the gold market despite the tightening trend of global central banks.

As I recommended before, gold can be bought from every bearish level. The closest support levels for gold are currently 1758 and 1740 dollars, respectively. The movement may remain in narrow ranges until the release of the US jobs numbers by the end of the week.

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For the second day in a row, the price of gold is trying to resist the strong US dollar. The price of gold settled around the level of 1852 dollars an ounce at the time of writing the analysis. It recovered from recent selling operations that pushed it towards the support level of 1829 dollars an ounce. Despite the strong dollar and higher Treasury yields, gold prices pared losses and settled higher as weak stock markets triggered some buying in the safe haven commodity.

Recently, gold prices fell as the dollar rose and Treasury yields rose amid concerns about rising inflation and the prospects for a strong monetary tightening by the US Federal Reserve. However, the bullion price regained most of what it lost, as heavy selling in the stock markets led to some safe haven buying.

Data from the US Department of Labor showed that job opportunities in the country fell by 455,000 to 11.4 million in April. The department’s numbers are down from about 11.9 million in March, the highest level on records going back more than 20 years. At this level, there are approximately two vacancies for every unemployed person. This is a sharp reversal of a historical pattern: Before the pandemic, there were more unemployed people than there were available jobs. The number of people who left their jobs remained near record levels at 4.4 million in April, most of them unchanged from the previous month. And nearly all of those who leave work do so to take on another job, usually for a higher pay.

Federal Reserve Chairman Jerome Powell has targeted the high level of available US jobs and hopes that by raising US interest rates, the Fed can slow the demand for workers and reduce the number of job vacancies. Powell and other Fed officials said their goal is to reduce demand and thus slow wage increases to cool inflation, perhaps without forcing many layoffs.

On the other hand, a separate report from the Institute of Supply Management showed that manufacturing activity in the United States of America unexpectedly grew at a slightly faster rate in May. The ISM said its manufacturing PMI rose to a reading of 56.1 in May from a reading of 55.4 in April, and any reading of the index above the 50 level indicates growth in the sector. The rise surprised economists, who had expected the index to fall to 54.5.

According to the technical analysis of gold: the recent performance of the gold price was normal, after attempts to rebound up and stop the gains. The price of gold did not find enough momentum to continue the rise, and I still prefer to buy gold from every descending level. The support levels of 1829 and 1815 dollars are the most appropriate to do so. In general, the gold market still has factors that may push it upwards in the future, which are the continuation of the Russian-Ukrainian war and its negative consequences on the future of global economic recovery.

The resistance levels for gold prices are currently 1865 and 1880 dollars are important for the bulls to regain control of the trend. I expect movements in narrow ranges for the gold market until the US jobs numbers are announced.

Gold futures contracts continued to achieve their gains, supported by the decline in the price of the US dollar. The gains of the gold price reached the level of 1870 dollars per ounce, then returned to stability around the level of 1858 dollars per ounce.

In general, the yellow metal was trying to withstand in the face of a myriad of developments that would make it difficult for the rise in gold prices, especially on the monetary policy front. It shows the demand that the public has for the precious metal.

All in all, gold prices are now trading at their best levels since May 11, driven by a weaker US dollar. Since the beginning of 2022 to date, the price of gold has increased by more than 1%. Silver, the sister commodity to gold, made modest gains. As silver futures rose to $21.723 an ounce. The white metal has fallen more than 7% over the year and more than 22% in the past 12 months.

Gold was surprisingly resilient during a rally in global financial markets and may have benefited from the weak dollar.

The US Dollar Index (DXY), which measures the performance of the US currency against a basket of major currencies, fell to 102.11 and a weak profit is a good thing for dollar-denominated commodities as it makes them cheaper to buy for foreign investors. Higher Treasury yields capped gold’s rally, with 10-year bond yields at 2.859%. One-year yields rose 2.6 basis points to 2.1026%, while 30-year yields rose 0.4 basis points to 3.07%.

The gold market is usually sensitive to a high interest rate environment because it raises the opportunity cost of holding non-yielding bullion. However, market analysts acknowledge that gold prices have benefited from lower nominal and real rates.

In other metals markets, copper futures fell to $4,335 a pound. Platinum futures fell to $943.40 an ounce. Advanced palladium futures contracts to 1976.00 dollars an ounce.

According to gold technical analysis: On the daily chart below, the price of gold is still in the phase of exiting the bearish channel and moving towards the resistance levels of 1878 and the psychological top of 1900 dollars. This will confirm the stronger control of the bulls on the trend. In general, I still prefer buying gold from every descending level, despite the tendency of global central banks to tighten their monetary policy, which is negative for gold. It finds momentum from other factors, most notably the continuation of the Russian-Ukrainian war and the persistence of the epidemic in the negative impact on the second largest economy in the world.

The closest support levels for gold are currently 1848, 1832 and 1820 dollars, respectively. The gold market will be affected today by the reaction of the US dollar to the announcement of the contents of the minutes of the last meeting of the US Federal Reserve.

The rise in US inflation levels coincided with the decline in US Treasury bond yields. Therefore, the gold price had the opportunity to move upwards strongly towards the resistance level of 1979 dollars an ounce, its highest in a month.

Gold futures rose after price inflation in the US was hot again in March. Despite expectations that the Federal Reserve will be bolder about US interest rates, the yellow metal is still heading towards its highest end in about a month. Gold prices have been in a tailspin during last month’s trading, rising nearly 3%. Since the beginning of the year 2022 to date, the price of the yellow metal has increased by about 8%.

As for the price of silver, the sister commodity to gold, it is looking to top $26. Silver futures rose to $25.74 an ounce. Overall, the price of the white metal increased by more than 5% over the past week, bringing its gains in 2022 to more than 10%.

Precious metals prices, which are usually a safe haven in an inflationary environment, rose in the wake of the March inflation data.

According to the US Bureau of Labor Statistics (BLS), annual US inflation came in at 8.5% last month, beating economists’ expectations of 8.4%. This was also up from 7.9% in February. Core inflation, which is decimating the volatile food and energy sectors, also jumped to 6.5%. But market analysts are divided over whether this is the peak of inflation or if there are further increases on the horizon for next month’s report. At the moment, there are two immediate factors that can dampen inflation: China and the Federal Reserve.

Experts stress that inflation could decline if the US central bank becomes bolder about interest rates. For his part, St. Louis Fed President James Bullard wants to see the benchmark rate at 3.5% by the end of the year. Minutes from the Federal Open Market Committee (FOMC) last month revealed that the institution plans to raise the federal funds rate by 50 basis points in May and June.

Moreover, the lockdowns in China are expected to exacerbate the global supply chain crisis. Experts say Beijing needs to accept that COVID-19 will never go away and that putting important financial centers under lockdown will not achieve its COVID Zero strategy. If the Chinese leadership accepts this, inflation may weaken.

Gold is usually sensitive to higher interest rates because it raises the opportunity cost of holding non-returning bullion.

Precious metals’ gains capped the dollar’s rally as the US Dollar Index (DXY) rose to 100.09, from an opening at 99.93. A stronger profit is generally a bad thing for dollar-priced commodities because it makes it more expensive for foreign investors to buy it. US Treasury yields were red across the board, with benchmark 10-year yields falling to 2.678%. The yield on the one-year note fell to 1.735%, while the yield on the 30-year note fell to 2.785%.

Relative to the prices of other metals, copper futures rose to $4.7115 a pound. Platinum futures rose to $979.20 an ounce. Palladium futures fell to $2365.00 an ounce.

According to the technical analysis of gold: The movement of bulls in the price of gold to breach the resistance of 1975 dollars an ounce may increase the strength of expectations to move towards the next historical psychological top of 2000 dollars an ounce. This may give the bulls an impetus to break through stronger historical ascending levels. On the other hand, according to the performance on the daily chart, the breach of the 1920-dollar support will be important to shift the bullish outlook, and so far, I still prefer buying gold from every descending level as long as global geopolitical tension and the epidemic are ongoing factors. Gold is a traditional and historical safe haven for investors from any turmoil.