Gold – XAU/USD Analysis – July 06, 2021

Upward Channel Breakout

Gold prices were closed at $1791.30 after placing a high of $1794.65 and a low of $1784.75. Gold extended its gains and rose for 4th consecutive session on Monday. The gains were, however, very small as the yellow metal remained under consolidation. The surge in gold prices could be attributed to the latest weakness in the U.S. dollar after the latest U.S. jobs report eased investors' fears about earlier than an expected interest rate hike. The U.S. Dollar Index (DXY) that measures the greenback value against the basket of six major currencies fell on Monday and turned red for the day.

The DXY fell and reached 92.14 level, which suggested weakness in the U.S. dollar against its rival currencies. Besides, the U.S. Treasury Yields on benchmark 10-year note also fell for the 6th consecutive session on Monday; however, the decline in yield was very little, which should be considered a flat movement for the day.

After a mixed data release on Friday from the U.S. Labor Department, the focus of investors shifted to minutes from the U.S. Federal Reserve's June policy meeting. The data revealed that companies in June hired many workers, the highest in 10 months; however, the unemployment remained higher than expectations. The pace of hourly earnings also showed slow growth, and workforce participation did not shift.

Meanwhile, the focus of investors on economic data and the next move from the Fed was strengthened by a rebound in the U.S. labor market. The markets were cheering the further evidence of strong economic recovery in worries about the persistent inflation. The minutes from Fed's latest June meeting are scheduled to release on Wednesday, which is expected to shed more light on policymakers' views on inflation and monetary policy.

Furthermore, the fast-spreading Delta variant of the COVID-19 has been driving up the number of cases in developing nations that also lack vaccine shots to fight the deadly surges. Their healthcare systems were also struggling to cope. In the past week, Indonesia has reached new highs in infection cases, and it has reported about 500 deaths per day. This daily average was also triple the size recorded in early June. Moreover, the Health Ministry of Israel revealed that it had recorded a steep drop in the efficacy rate of Pfizer and BioNtech vaccine in preventing coronavirus infections due to the spread of Delta variant and the easing of government restrictions. These developments raised fears in the market and supported the safe-haven metal prices on Monday.

Gold Intraday Technical Level

Support Resistance

1785.81 1795.71

1780.33 1800.13

1775.91 1805.61

Pivot Point: 1790.23

Gold - XAU/USD - Technical Outlook

Gold is trading with a bullish bias at the 1,802 level, having violated the resistance area of the 1,796 level. This exposes the precious metal gold towards the next resistance level of 1,825, extended by a 38.2% Fibonacci retracement level. On the lower side, the precious metal's support stays at 1,796 levels. On the 4 hour timeframe, gold has closed a bullish engulfing candle that's suggesting strong bullish bias in gold. The 50 EMA is also supporting buying trend along with the MACD. Therefore, gold has the potential to soar further higher until 1,825. All the best!