Gold – XAU/USD Analysis – July 08, 2021

Unemployment Claims Ahead!

Gold prices were closed at $1802.10 after placing a high of $1810.20 and a low of $1794.10. Gold continued its bullish streak for the 6th consecutive session driven by a slide in the U.S. Treasury yields after the minutes from Federal Reserve’s June policy meeting revealed that the substantial further progress on economic recovery was not met yet. The minutes from the central bank of the U.S. essentially confirmed market expectations and failed to present additional hawkish surprises in the market. The threshold for tapering asset purchases has yet to be met while the rising inflation levels primarily reflected temporary factors that is why Fed remained cautious about being more hawkish in the minutes.

Last month, a surprise hawkish tilt dragged gold to the downside by 7% as the U.S. dollar and Treasury yields moved higher. However, on Wednesday, the U.S. Treasury yields on benchmark 10-year note fell to their lowest in more than four months and reached below 1.30%. At the same time, the U.S. Dollar Index that measures the greenback value against the basket of six major currencies remained green for the day and extended its gains to reach 92.84 level, its highest in almost 2-months.

On the data front, at 19:00 GMT, the JOLTS Job Openings declined to 9.21M against the expected 9.30M and weighed on the U.S. dollar that added further gains in gold prices. At 19:01 GMT, IBD/TIPP Economic Optimism dropped to 54.3 against the forecasted 57.3, which also weighed on the U.S. dollar, which pushed gold further. According to the minutes released on Wednesday, some Federal Reserve officials talked about tapering; however, some were in a rush to get the process going. The minutes could only provide a hint as to when the central bank decided to start reducing the pace of bond purchases. Most of the officials believed that the benchmark set by the Federal Reserve for any significant shifts in the policy I,e “substantial further progress” has not yet been met, so the supporting measures should be continued for a while.

The Federal Reserve, Open Market Committee, held the short-term interest rates near zero in its latest policy meeting, but it also indicated that it might adjust policy and increase the rates in the upcoming months. Currently, the rates are anchored in a range between 0% and 0.25%, and Fed did not change these rates in the meeting as expected. However, many officials suggested increasing the rate two times in 2023 to 0.6%.

Gold is susceptible to the rising interest rates as it increases the opportunity cost of holding non-yielding bullion, and when this was revealed in the previous month, gold suffered by about 7%. However, the buying of gold from central banks around the world in recent months has offered some support to gold that is keeping its prices higher.

Gold Intraday Technical Level

Support Resistance

1794.06 1810.16

1786.03 1818.23

1777.96 1826.26

Pivot Point: 1802.13

Gold - XAU/USD - Technical Outlook

Gold is trading with a bearish bias at the 1,796 level on Thursday. In the 4 hour timeframe, the precious metal gold has violated an upward channel that’s suggesting bearish trend in gold. Gold’s immediate resistance continues to stay at 1,802 levels. At the moment, gold is gaining support at 1,793 level that’s being extended by a double bottom pattern. The 50 periods EMA is extending support at the same level of 1,783. Therefore, the traders are going to keep their eyes on the 1,796 level today. Below this, gold can find the next support at 1,790 and 1,783. Conversely, a bullish crossover of 1,802 levels can lead the gold price towards a 1,814 level. All the best!