Gold has once again entered the spotlight in trading this week, following its break higher in trading yesterday. Since the end of June, we’ve been seeing price action trend around in between $4,000 and $4,200 for the most part. But after some strong early buying yesterday, there was enough follow through to see price break above the $4,200 level for the first time in over seven weeks.
Earlier today, we saw another wave of buying in early Asia trading and that saw price hit a high of $4,303. That before settling back lower now, but gold is still up 0.3% to $4,260 on the day.
So, what’s next for gold as we look towards the second half of the week?
[Gold (XAU/USD) daily chart]
Well, the technical signs are definitely looking encouraging. Upon the break above $4,200, it frees up some scope to roam higher for now. That being said, there are looming key resistance levels to watch out for close by that may limit gains.
The first will be the 23.6 Fib retracement level from the swing lower from January to July at around $4,333. I wouldn’t place too much importance on that but it is still a checkpoint for buyers if they need want to build further momentum from hereon. The next and more crucial one though would be the 100-day moving average (red line) at $4,393 currently.
After having dropped below both its key daily moving averages for the first time since 2023, I would argue that gold buyers have done well in limiting losses closer to around the $4,000 mark. In all honesty, the technical signal could’ve made for much worse conditions. But I guess the scale of the drop since peaking in January also played a role, with sellers running the price down by over 28%.
In terms of fundamentals, not all too much has changed. We’ve seen constant back and forth on the US-Iran issue and bond yields are keeping elevated amid the resurgence in oil prices during July. But with Trump showing signs of not wanting to escalate things further now, that is one reason to push the “buy everything” narrative again – including gold.
That being said, I would argue it is maybe just a small part of the equation.
Perhaps the bigger consideration is the fact that the dollar has dropped off quite a bit after the joint intervention on USD/JPY. As mentioned before, the US intervening is a dangerous game as it will border on the administration needing to take a dollar policy stance. And in this instance, it is to say that the dollar is “too strong” that they feel compelled to step in i.e. wanting a weaker dollar. So, there’s that to factor in as well.
But perhaps it is the culmination of all the small things that add up. A technical break to the upside. Strong buying in Asia trading present. US-Iran tensions easing on the surface. Dollar sentiment being marred after the USD/JPY joint intervention. And dip buyers looking to get back in after some consolidation in July.
Whatever the case is, the technical boundaries have now changed. For buyers, they will be taking aim at the key resistance levels outlined above. For sellers, they need to push for a break back below $4,200 to break the latest momentum shift.
This article was written by Justin Low at investinglive.com.
