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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The highlight of the sterling this week will be the release of British inflation data on Wednesday although the retail sales reading on Friday will also be highly anticipated. It is the global market trends that will ultimately determine the direction of the sterling over the coming days. During the last week’s trading, the GBP/USD exchange rate rebounded to the resistance level of 1.2406. Below this level we recommended to our valued clients to sell the currency pair and the GBP/USD pair fell to the level of 1.2172 and settled around the level of 1.2220 at the time of writing the analysis.

The important UK data comes days after the Bank of England raised interest rates by 25 basis points but warned that bigger and more hikes could occur over the coming months if the data warranted it. Therefore, the British pound initially fell on the initial announcement of a 25 basis point hike as markets thought it was justified due to high inflation, but it rose as it became clear that the British Central Bank is likely to be more aggressive in the future as it prioritizes the end of inflation targeting on GDP growth management.

The main takeaway from last Thursday’s BoE policy update is that the data is important, so next Wednesday’s inflation numbers will be of great interest. Britain’s core CPI inflation is likely to rise 0.2 point to 9.1% y/y in May, the highest level since records began in 1989. Core inflation is likely to rise 0.1 point to 6.3% y/y. This means that the UK now has a hotter core CPI than the Eurozone or the US. A big win in these headline numbers could push UK bond yields higher as investors anticipate further hikes in bank interest rates, helping the GBP exchange rates in tandem.

Meanwhile, UK PMI numbers on Thursday will give the first major snapshot of how the UK economy will perform in June. Markets are looking for the composite PMI component of the PMI due to read at 51.8, unchanged in May. The manufacturing PMI is expected to come in at 54.6 and the all-important services PMI at 53.0, down from 54.6 in May.

Britain’s retail sales on Friday will give insight into how consumers are reacting to rising inflation and are expected to have contracted 0.9%m/m in May, down from the 1.4% growth rate recorded previously. A strong set of BOE retail numbers will indicate that inflationary pressures will continue to rise as strong demand will only encourage businesses to pass on cost pressures.

Prior to the data, the pound sterling against the euro was seen at 1.17 after declining by just 0.10% last week while the pound sterling against the U.S. dollar was down at 1.2284 after dropping just a third of a percent. Global market sentiment will also be a major determinant of where the GBP moves as this is a pro-cyclical currency that tends to rally support during times of global economic recovery. Last week saw some major US indexes officially fall into a bear market, which means that the Pound’s backdrop remains tough as further stock losses are more likely than none.

According to the technical analysis of the pair: Expectations of the possibility of moving the price of the GBP/USD currency pair to the 1.2000 psychological support level may return to the fore if it returns to stability below the 1.2170 support level again. According to the performance on the daily chart below, the general trend of the GBP/USD is still to the downside. In the same time period, there will be no opportunity to break the general trend without moving above the resistance 1.2585, otherwise the general trend will remain bearish.

The currency pair does not expect important and influential data today, and investor sentiment will have the strongest and direct impact.

Ripple has continued to nosedive as does the rest of crypto and now looks very likely to reach the $0.20 level based upon previous support. At this point, crypto is dead money, as Ponzi schemes and fraud have run rampant. We have seen a lot of these schemes exposed in the last few weeks, and the money flowing out of crypto has been astonishing. In fact, two out of the $3 trillion worth of money that was in the crypto market is now gone.

At this point, I think it’s only a matter of time before we see rallies, but those rallies should be opportunities to short this market, and I will do so every time we see a significant amount of pushback. Ultimately, this is a market that given enough time will probably continue to grind it lower, and the $0.40 level should act as a bit of a barrier. Furthermore, the 50 Day EMA has sliced below the $0.50 level and is running much lower.

Ripple is also stuck with an SEC lawsuit that seems like it’s never going to end, so although ripple, unlike so many other crypto networks, has a real-life use case, it may never get to see it in the United States. Until that court case is cleared, it’s difficult to imagine a scenario where Ripple will get bullish. Having said that, if they do win the case it may be in a short-term buying opportunity, turning into a longer-term one if crypto can gather itself. However, with so much fraud and Ponzi schemes coming apart at the same time, the biggest problem is crypto has a major confidence issue. As long as there’s a confidence issue with crypto, the rest of it is not going to perform well, so there’s no reason to think that this market will do anything different.

Ripple probably doesn’t go to zero, only because there are some banks out there that use it. However, I think the $0.20 level is going to be crucial to defend, and if it cannot do so, then we will see Ripple drop below $0.10 before it bottoms. Quite frankly, that looks much more likely to happen then it did just a few weeks ago. The question now is what happens next with crypto? This looks a lot like technology stocks in 1999.

The euro rallied again on Monday, but we are still significantly below a major resistance barrier. The 1.08 level is an area where I would expect to see quite a bit of resistance, as we had sold off so drastically from that region lately. Yes, Christine Lagarde has recently stated that there should be several 25 basis point hikes coming from the ECB, but at the end of the day, they are still not as hawkish as the Federal Reserve.

Furthermore, you need to keep in mind that the general “risk-off attitude” of traders around the world will continue to drive more money into the US dollar. The bond markets are starting to see falling yields in America, but eventually, you will start to see a shift as people will focus on the demand for bonds. That of course requires US dollars. I would also point out that Monday was Memorial Day, which is a major holiday in the United States and therefore most traders will not have been part of the action.

If we were to break above the 1.09 level, then it’s time to start focusing on what the market is doing, not what it “should do.” At that point, we may have seen the bottom of the euro, but I think we have a lot of work to do before that happens. The European economy continues to struggle, and although inflation is picking up, the reality is that growth will be slow for the Europeans, so over the longer term the euro should continue to be soft. If you really choose to buy the euro, you may wish to buy it against other currencies, not the greenback.

The US dollar was overbought for quite some time, so the fact that we started to see the greenback sell off should not be a huge surprise. After all, nothing goes straight up in the air forever. If we get some type of significant negativity in this market, it will more than likely kick off US dollar buying across multiple markets in the Forex realm, and it becomes a bit of a self-fulfilling cycle. Underneath, if we were to break below the 1.06 level, it opens up a move down to the lows again, nearly 1.04 level. Expect choppiness, but I’m still looking for an opportunity to get short.

As long as traders can get more return for a “risk-free asset” such as a bond, gold loses a lot of its shine.

Gold markets got crushed on Monday as we continue to see the US dollar act like a wrecking ball against everything it touches. Because of this, gold was no different and we managed to fall all the way down to the 200-day EMA. The 200-day EMA is a very important technical indicator that a lot of technically driven traders will pay close attention to, so the fact that we bounced a bit from there is probably not much of a surprise. The question now of course is “Where do we go from here?”

If the market were to break down below the lows of the Monday session, that would indicate that more momentum has come into the marketplace as far as selling is concerned, it would be very likely that the gold market would attempt to reach the $1800 level below, which is not only a psychologically significant area but an area where we have seen a lot of action previously. The main culprit for this will be the US dollar and rising interest rates in the bond market. As long as traders can get more return for a “risk-free asset” such as a bond, gold loses a lot of its shine.

Alternatively, if we were to turn around and start to rally, it is not really until we break above the $1900 level on a daily close that I would consider a reversal in the trend. If we get that, then the market would almost certainly challenge the 50-day EMA, which is currently at the $1920 level. This would take quite a bit of effort, and more importantly, for the US dollar to suddenly stop strengthening. I do not necessarily think that is likely, so more likely than not we will continue to see a lot of downward pressure, and perhaps more of a “sell on the short-term rally” type of feel in this market.

As we are between the 200-day EMA and the 50-day EMA indicators, it quite often means that you are going to see a lot of choppy volatility before a bigger move appears. That makes sense because nobody knows what is going on with the economy at the moment, and all eyes are on the Federal Reserve.

Pay close attention to the next candlestick or two, because we should have a lot of clarity coming rather quickly.

Gold markets rallied significantly on Friday to show signs of strength. We reached the 50-day EMA, which is an indicator that a lot of people do pay close attention to. The 50-day EMA has been important multiple times, as we had seen the indicator offer dynamic support. During the day on Friday, we reached that from underneath and found dynamic resistance. It is interesting to see how this has plays out because we are now stuck between the 50-day EMA and the 200-day EMA.

The market typically will get very noisy between these two moving averages, so it is worth paying close attention to whether or not we can break out of this range. The hammer from the Thursday session suggests that there are plenty of buyers underneath, so if we were to break down below there, that would be an extraordinarily negative turn of events. Breaking down below the 200-day EMA opens up a flood of selling, perhaps sending the market down to the $1800 level. The market breaking down like that would be an extraordinarily negative turn of events and could accelerate momentum.

If we turn around a break above the 50-day EMA, that could open up a move to the $1950 level. After that, we then have a significant amount of resistance at the $1970 level. The market will continue to be noisy even if we do get a bullish move, but you need to pay close attention to the yields in America because if they continue to rise over the longer term, that could start to have a negative influence on this market. The market will probably continue to see a lot of volatility, so you need to be very cautious about the position sizing, and make sure that if the market starts to work against you, you bail out as quickly as possible. That being said, pay close attention to the next candlestick or two, because we should have a lot of clarity coming rather quickly. In general, I believe this is a market that will continue to see a lot of questions asked of it, and a lot of uncertainty is ahead. With the inflation and growth concerns, we will continue to have to stand guard.

Make sure to keep your position size reasonable.

Gold markets have fallen a bit during the trading session on Thursday to wipe out the hammer from the Wednesday session. This is a very negative sign, but I think at this point it is probably only a matter of time before buyers come back. The 50 Day EMA is currently rising and is sitting at the $1927 level. If that continues to be the case, it could bring in buyers on dips as it allows us to pick up “cheap gold.”

If we do break down even further, notably below the 50 Day EMA, the $1900 level should offer a significant amount of support as well. In that scenario, I think it is probably only a matter of time before the market would go looking to reach the 200 Day EMA. That is essentially the $1855 level, an area that we had broken out of previously. This would be a huge move to the downside, so I do not necessarily think that is the most likely scenario.

If we turn around and rally, it is the $1970 level that will be important, and a breach above that allows the market to go looking towards the $2000 level. While we are still very much in an uptrend, it must be said that the price action on Thursday will have left quite a bit to be desired. Gold does tend to be very choppy at times, and this might be one of those times. You will notice that over the last couple of months we have been trading in the same basic consolidation area, so therefore it is not a huge surprise to see that the market has come back to it.

Pay attention to interest rates in America because they are starting to offer “real yields”, which does not bode well for gold most of the time. If yields continue to rise in America, that could cause major problems for this market. The market turning around and smashing through the $2000 level could signal that we are going to all-time highs again, but we have seen a lot of negativity thrown on this market during the last 24 hours. Whether or not we can turn things around remains an open question, but one I suspect we will see answered rather quickly. Make sure to keep your position size reasonable.

The projected move from the pattern suggests that we could go looking to reach the $2020 handle.

The gold markets rallied during the trading session on Monday to reach the $2000 area. This obviously has a certain amount of technical and psychological importance, but the fact that we have sliced through that area so easily in the past does suggest that we should be able to do so again. The short-term pullback that we have seen since then should be a buying opportunity, with the $1970 level being an area that previously had been resistant. “Market memory” suggests that we are going to have plenty of buyers in that vicinity.

It is worth noting that the previous action has been trading between the $1920 level and the $1970 level. The projected move from the pattern suggests that we could go looking to reach the $2020 handle. The market continues to see a lot of noisy behavior, but I do think that it is only a matter of time before we get a bit of follow-through in a continuation of the overall uptrend. If we break above the $2000 level, then I think the buying pressure will continue to be very aggressive. Ultimately, I like the idea of buying dips in this market and do not have any interest in selling gold until we break through the $1900 level.

As we are so far away from that level, then I think it is likely that we would need to see some type of major shift in the overall global risk and the overall outlook for the markets. I think that as long as we continue to see a lot of uncertainty out there, gold should continue to see plenty of buyers. Keep in mind that there are a lot of concerns about inflation out there and of course fiat currency destruction. Gold is a bit of a hedge for all of that and simply put, the market has been in a strong uptrend for quite some time, there is no reason to think that is going to change anytime soon. I like the idea of taking advantage of value as it occurs, and I will be waiting to see whether or not that offers itself, and therefore I might look at the shorter-term charts in order to get long going forward. At this point, I look at the $1970 level should offer support underneath.

The next few months are going to be very difficult and very noisy, and as a result, it looks likely that the markets will need to be treated with extreme caution. 

The S&P 500 initially fell on Friday and looked as if it was going to struggle for a bit, only to save itself at the end of the session. This is quite typical as institutions come in late in the day and pick up stocks. That being said, the market is more likely than not going to face a bit of resistance between here and the small double top that sits at the 4585 handle. The area should be difficult, but it is going to be interesting to see whether or not we can break above there. If we do, then all of the negativity is suddenly gone.

What is interesting is that bond yields continue to race higher, as the bond market does not seem to be as excited about the prospect of the Federal Reserve backing down like Wall Street is. Most Wall Street pundits think that the Federal Reserve will not dare raise interest rates in this inflationary environment, but Jerome Powell may have no choice. If that is the case, it will absolutely crush the stock market, especially if he has to do it rapidly in an environment that is very dangerous.

On the other hand, if Jerome Powell sides with the institutional bankers again, then it is very likely that inflation will run hot, and stocks will be bought as an inflation hedge. This would not be conducive to an economy that allows for a lot of profits for companies, but it has been a while since the stock market had anything to do with that. It is more about liquidity at this point, and the more liquidity there is, the higher these markets tend to go.

It is all about monetary flow, and it is likely that it comes down to what the Federal Reserve does. The next few months are going to be very difficult and very noisy, and as a result, it looks likely that the markets will need to be treated with extreme caution. The consolidation just underneath should be supportive, but if we were to break down below there, the 4450 handle will be the gateway to lower prices. Ultimately, this is a market that I think will find its way higher in the short term, but it is only going to take just a little bit of negativity to turn things around.