Technical Analysis

GOLD Price Analysis – July 11, 2024

By LonghornFX Technical Analysis
Jul 11, 20243 min

Daily Price Outlook

China's Pause in Gold Purchases and Its Impact on Global Market Trends and Prices

China's central bank, the People’s Bank of China (PBOC), has halted its gold purchases for the second consecutive month, maintaining its reserves at 72.8 million troy ounces.

This marks a departure from its previous 18-month streak of continuous gold acquisitions since November 2022, during which China's consistent buying had driven gold prices to record highs.

However, the PBOC's decision signals a temporary pause in its strategy to bolster gold reserves, which had been a significant factor in the sustained upward trajectory of gold prices.

This development is likely to ease some of the upward pressure on global gold markets that had resulted from China's persistent purchasing activity over the past year and a half.

Impact of China's Pause in Gold Purchases on Global Markets and Prices

However, the reason behind this pause could be linked to the People’s Bank of China (PBOC) adjusting its strategy in response to fluctuating global gold prices and domestic economic conditions. Global gold prices have shown volatility, prompting the PBOC to reassess its buying patterns.

Furthermore, domestic factors such as inflation and economic growth rates may have influenced the decision. By halting gold accumulation, the PBOC might aim to stabilize its reserves at current levels or await more favourable market conditions before resuming purchases, impacting global gold markets and prices accordingly.

Therefore, the PBOC's pause in gold purchases could alleviate some of the upward pressure on global gold prices by reducing demand from one of the largest buyers.

This may lead to stabilization or even a slight correction in prices, depending on market reactions to China's altered buying behavior and broader economic factors influencing gold markets.

China's Quiet Gold Buying Continues Despite Official Pause; Federal Reserve Policy Shifts Market Focus

Despite the official pause in its public gold purchases, some experts believe they might still be acquiring it quietly, especially since prices are currently high.

Christopher Vecchio, who heads Futures & Forex at Tastylive, mentioned in an interview with Kitco News that regional data suggests ongoing Chinese gold purchases through late June.

He pointed out that while central bank purchases used to strongly affect gold prices, their influence has lessened recently. Now, attention has shifted more towards the Federal Reserve's decisions on interest rates, which are seen as having a bigger impact on where gold prices go next.

GOLD Price Chart - Source: Tradingview
GOLD Price Chart - Source: Tradingview

GOLD (XAU/USD) - Technical Analysis

Gold prices are poised at a critical juncture, currently trading at $2382. The 4-hour chart reveals a complex interplay of support and resistance levels.

The immediate resistance stands at $2391.22, a level that gold bulls need to overcome to confirm a sustained upward move. A break above this resistance could propel prices towards the next targets at $2402.89 and $2412.31.

Conversely, the immediate support lies at $2370.65. A breach below this level could trigger a deeper retracement towards $2358.72 and $2349.50. The 50-day Exponential Moving Average (EMA), currently at $2371.18, acts as a dynamic support level that could bolster prices on any dips.

The Relative Strength Index (RSI) reading of 64 suggests that gold is in overbought territory, raising the possibility of a short-term pullback. However, the overall trend remains bullish, with the potential for further upside if buyers maintain momentum.

Given the current technical setup, a conservative approach would be to wait for a confirmed break above $2391.22 before initiating long positions.

Alternatively, aggressive traders could consider buying above $2379, with a stop-loss order placed below $2370. The initial target for profit-taking would be the pivot point at $2396.75.

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