Gold – XAU/USD Analysis – July 01, 2021

Eyes on ISM Manufacturing PMI!

Gold was closed at $1708.75 after placing a high of $1774.65 and a low of $1753.20. Gold experienced its worst monthly loss in almost 5-years over the speculations of stimulus tapering and interest rate hikes by the Federal Reserve. However, neither of the two options was close to happening anytime soon. Gold has been under pressure since January that began last year when in August gold reached its record highs above $2000 and rushed for a few months before entering into a series of bearish candles from November when the first breakthrough in coronavirus vaccine efficiency was announced.

Gold attempted to break the downward pressure and rose in May back to $1905; however, a new round of short-selling prompted and took gold back to $1800 levels. This week the prices went further down amid the talks of tightening by the Federal Reserve, and gold reached its 2-months lowest level around $1750. This month, Fed has indicated that it expects two interest rate hikes before 2023, pushing the rates to 0.6% from the current level near zero at 0.25%. For tapering the $120 billion asset purchases, the Fed has not yet provided any timetable. Still, it has shown that it will be looking at macroeconomic data closely to determine the perfect timing for a complete freeze of asset & bond purchases. Meanwhile, bankers and FOMC members, and other officials also started talking about interest rate hikes and tapering that dragged gold prices further on the downside.

On the data front, at 17:15 GMT, the ADP Non-Farm Employment Change for June increased to 692K against the predicted 555K and supported the U.S. dollar and further capped gains in gold. At 18:45 GMT, the Chicago PMI for June declined to 66.1 against the anticipated 70.2 and weighed on the U.S. dollar and added further gains in gold. At 19:00 GMT, the Pending Home Sales rose to 8.0% against the estimated -1.1% and supported on the U.S. dollar and limited the rising prices of gold. The U.S. Dollar Index (DXY) that measures the greenback value against the basket of six major currencies, surged for the third consecutive session on Wednesday and reached 92.45 level. The U.S. dollar was strong on the day as the most awaited job report from the Labour Department suggested a rising number of jobs created in June. However, despite the strength in the U.S. dollar, the yellow metal remained green for the day amid the risk-off market sentiment.

The highly contagious Delta variant of the coronavirus has prompted renewed concerns of a new wave of coronavirus. Following these concerns, many countries have recently recommended mask-wearing even for vaccinated people. Log Angeles, America’s most populous county, has asked its people to protect unvaccinated people from the most transmissible delta variant spreading fast in the region. To do so, the officials have recommended wearing masks just two weeks after the state relaxed the COVID-restrictions. These concerns prompted the safe-haven demand in the market that pushed yellow metal prices.

Gold Intraday Technical Level

Support Resistance

1756.41 1777.86

1744.08 1786.98

1734.96 1799.31

Pivot Point: 1765.53

Gold - XAU/USD - Technical Outlook

On Thursday, the precious metal gold continues trading with a slight bullish bais at 1,776 exhibiting a strong price action. The metal has already violated the resistance level of 1,765. Now it’s trading at 1,761 level, having bounced off over the support level of 1,756 level. Continuation of a buying trend can expose gold price towards the next resistance level of 1,782 and 1,796. The MACD is closing histograms below 0 points, supporting the selling trend, while the 50 periods moving average is also holding around 1,776 level. Gold’s next support stays at 1,765 and 1,752 levels. Good luck!