Gold – XAU/USD Analysis – July 05, 2021

Upward Channel In Play

Gold prices were closed at $1787.55 after placing a high of $1795.90 and a low of $1774.40. Gold extended its gains for the 3rd consecutive session on Friday amid fresh weakness in the U.S. dollar and the benchmark U.S. Treasury yields. The U.S. Dollar Index that gauges the greenback worth against the basket of six major currencies reversed its course and broke its seven-day bullish streak and reached 92.23 level after touching 92.74, its highest since April 06. The Treasury Yield on benchmark 10-year note also dropped on Friday; the benchmark yield continued its bearish streak for the 5th consecutive session on Friday and reached 1.42%.

Gold extended its bullish movements on Friday over the concerns of the Delta variant of the coronavirus as it boosted the safe-haven appeal and turned on the risk-off market sentiment. On the other hand, the prospects of the U.S Federal Reserve tightening were also weighed by the U.S. jobs report that showed a slight rise in the unemployment rate.

At 17:30 GMT, the Average Hourly Earnings for June remained flat with the expectations of 0.3%. The Non-Farm Employment Change surged to 850K against the forecasted 725K and supported the U.S. dollar. The Unemployment Rate from June rose to 5.9% against the expected 5.6% and weighed on the U.S. dollar. The Trade Balance from May remained unchanged at -71.2B. At 19:00 GMT, the Factory Orders in May also remained flat with projections of 1.7%.

The U.S. Fed officials have recently suggested that the Central Bank start to taper its asset purchases this year. However, many analysts believe that the data failed to trigger a rush from the Fed to ease stimulus or begin interest rate hikes. The U.S. Treasury Yield and the DXY both fell after the report and pushed gold higher as lower treasury yields reduced the opportunity cost of holding gold. Meanwhile, the Delta variant of the coronavirus raised fears all over the globe after it started to spread fast in Asia and Europe.

On Friday, the WHO head (World Health Organization) said that the Delta variant of COVID-19 was discovered in at least 98 countries and was spreading quickly in countries with low and high vaccination coverage. During the biweekly press conference, Tedros Adhanom Gebreyesus urged leaders to push back against the daunting new coronavirus surges through increased vaccination efforts and public health measures. He also warned that delta had become the dominant strain in many countries, and if it continues, it will be a dangerous period of a pandemic. Two measures recommended by the chief of WHO all countries should adopt that to push back the rising cases of coronavirus included strong surveillance, early case detection, strategic testing, isolation, clinical care, social distancing, avoiding crowded areas, and keeping indoor spaces well ventilated.\Apart from public health and social measures, the second way Tedros suggested was the global sharing of protective gear, tests, oxygen, treatment, and vaccines.

The President of Iran, Hassan Rouhani, expressed fears that Iran will be hit by a new wave of coronavirus due to an outbreak of Delta variant in the Middle East’s hardest-hit country. Meanwhile, Dr. Anthony Fauci said that the U.S. would soon face a rising number of coronavirus cases of highly infectious Delta variants in areas where vaccination rates were low.

All the fuss about the Delta variant of coronavirus kept safe-haven appeal intact in the market and pushed gold prices higher on Friday.

Gold Intraday Technical Level

Support Resistance

1785.46 1787.66

1784.53 1788.93

1783.26 1789.86

Pivot Point: 1786.73

Gold - XAU/USD - Technical Outlook

Gold is trading with a bullish bias at the 1,789 level; however, it’s still maintaining a narrow trading range of 1,796 – 1,784 levels. On the 4 hour timeframe, gold is facing resistance at the 1,796 level that’s being extended by a 50% Fibonacci retracement level. On the higher side, a bullish breakout of 1,796 levels exposes gold price towards the next resistance area of 1,809. At the same time, gold’s support continues to hold around the 1,784 mark.

On the hourly timeframe, the 50 EMA is supporting bullish bias in metal. The bearish breakout of 1,784 exposes the metal towards the next support level of 1,776 level. The MACD is holding a bullish zone, demonstrating buying trend in gold. All the best!