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Technical Analysis

Gold – XAU/USD Analysis – July 22, 2021

Triple Bottom Pattern Support

The XAU/USD was closed at $1805.25 after placing a high of $1814.35 and a low of $1794.55. Gold dropped for the 5th consecutive session on Wednesday and extended its loss to hit its 1-week lowest level amid the renewed risk appetite in the market along with the rebounding U.S. Treasury Yields.

The stocks and bond yields saw a massive sell-off on Monday due to rising risk-off market sentiment driven by the concerns over stalling global economic recovery amid the rising number of Delta variant COVID-19 infections throughout the globe. However, on Wednesday, the riskier assets like stocks and yields recovered and dimmed the safe-haven appeal for bullion.

Meanwhile, the fears about the recent surge in coronavirus cases caused by the Delta variant eased down and took away the rising demand for the U.S. dollar triggered by its safe-haven status. The return of risk appetite also played an essential role in pulling back the price of the U.S. dollar that had reached its highest since late March at 93.19 level on Wednesday before dropping.

The U.S. bond yields recovered on Wednesday after falling to their lowest since February on Tuesday and reached 1.297%. The U.S. Dollar Index that measures the greenback value against the basket of six major currencies fell on Wednesday after rising for the previous four consecutive sessions and reached 92.73.

The rise in Treasury Yields continues to pull back the prices of gold on Wednesday as the rising yields tend to increase the opportunity cost of holding nonyielding bullion. According to some analysts, the possibility of the Fed’s transitory view being proved correct, especially in the rising COVID-19 cases situation, proved negative for an inflation-hedge like gold. However, an accommodative monetary policy in this scenario could prove beneficial for the yellow metal.

There was no macroeconomic data from the U.S. side on Wednesday. However, the U.S. Federal Reserve officials will meet next week, while the meeting of the European Central Bank is scheduled for Thursday that has got the attention of most investors right now.

On the coronavirus front, the World Health Organization reported that the highly transmissible delta variant of the coronavirus was now spread to 124 countries. It will become the dominant strain globally as it was outcompeting other virus variants in the coming months.

In the last week, the global number of coronavirus cases rose by 3.4million, which was up by 12% from the previous week. The average daily count of the cases worldwide became 490,000 cases compared to the 400,000 cases a week ago. Approximately 190 million confirmed coronavirus cases had been reported throughout the globe, along with a death rate of 4 million.

Australia went into lockdown again on Tuesday while the re-openings in the U.K. and the United States were putting pressure on the government. Meanwhile, the President of the U.S., Joe Biden, said that children below 12 would receive vaccination within months and urged unvaccinated Americans to get their vaccine shots as the virus surged across the nation.

Gold Intraday Technical Level

Support Resistance
1802.44 1823.14
1793.47 1834.87
1781.74 1843.84
Pivot Point: 1814.17

Gold – XAU/USD – Technical Outlook

On Thursday, the precious metal gold is trading with a bearish bias at a 1,798 level. It has violated the upward channel support at the 1,802 level supporting selling bias in metal now. Furthermore, gold has failed to cross above the 50 EMA level at 1,811, and closing below this EMA is adding additional selling pressure on gold. The bearish breakout of gold’s support level of 1,796 exposes gold price towards the next support area of 1,784. Conversely, a bullish crossover of 1,811 levels can reveal gold price towards 1,824 resistance. The MACD supports a selling bias; therefore, the trader’s attention will be on the 1,796 level to determine whether to short below a stay long above this level. All the best!