Gold Technical Analysis: Today will Determine Fate of Markets

Mahmoud Abdallah

For four trading sessions in a row, the price of gold is moving in a downward correction range. This is after it pushed towards the support level of $1845 an ounce, its lowest in a month, before settling around the level of $1860 an ounce at the time of writing the analysis.

What contributed to the selling of the yellow metal was the rise in the US dollar, in addition to the yield gains on long-term bonds. Today, the US Central Bank announced that it will determine the fate of completing the current bearish correction, or returning to the vicinity of the psychological top of 1900 dollars for an ounce again.

The US dollar index DXY, which measures the performance of the dollar against a basket of six major competing currencies, rose to 90.68 from the lowest level at 90.35, trimmed its gains and declined to 90.52 later. The 10-year US Treasury yield rose to 1.51%. In the same performance of gold, silver futures ended trading as low as $27.693 an ounce, while copper futures settled at $4.3330 an pound.

So far, it is widely expected that the US Federal Reserve will not make any changes to monetary policy, but it may indicate that it has begun to consider reducing its asset purchases. Wednesday's Federal Reserve announcement is likely to acknowledge the recent increase in inflation, highlighted by today's Department of Labor report that showed record growth in producer prices.

The report said the US producer price index for final demand rose 0.8% in May after rising 0.6% in April. Economists had expected another 0.6% increase. Compared to the same month last year, producer prices in May rose 6.6 percent, reflecting the largest increase since the 12-month data first calculated in November 2010.

The Commerce Department also released a report showing that US retail sales fell more-than-expected in May, falling 1.3% after an upwardly revised 0.9% increase in April. Economists had expected retail sales to decline 0.8% compared to the unchanged reading originally reported for the previous month.

The Fed also released a report showing US industrial production rose 0.8% in May after a slightly revised 0.1% rise in April.

India is gradually reopening as the number of new coronavirus infections continues to decline. India's health ministry on Wednesday reported 62,224 new infections in the past 24 hours, down from a peak of more than 400,000 new infections a day in April. It also reported 2,542 deaths during the past 24 hours, bringing the total deaths to 379,573. It is believed that both numbers represent much smaller numbers. And in New Delhi, authorities are reopening stores, malls and restaurants this week. Restrictions were also eased in Mumbai, Bengaluru, Chennai and other cities as new infections declined.

So far, authorities are still warning people to wear face masks and keep a safe distance.

Meanwhile, daily COVID-19 deaths in the United States have fallen to an average of 340 from more than 3,400 in mid-January. It averages 14,000 cases per day, down from a quarter of a million cases per day during the winter. Worldwide, the confirmed death toll from the coronavirus has reached 3.8 million. Actual totals in the United States and around the world are believed to be much higher, with many cases being ignored or possibly hidden by some countries.

Gold Technical Analysis: On the chart of the daily time frame, there is a clear break of the general bullish trend for the price of gold. The bears’ control over performance will be strengthened technically if the price of gold moves towards the support levels 1840, 1825 and 1810. On the upside, the psychological resistance of 1900 dollars will remain an important level for stronger control for the bulls to perform again. I still prefer buying gold from every bearish level, whatever the decision of the US Federal Reserve today.

Gold

Mahmoud Abdallah
Mahmoud has been working fulltime in the Foreign Exchange markets for 12 years. Offers his analysis, articles and recommendations at the most renewed Arabic websites specialized in the global financial markets, and his experience gained a lot of interest among Arab traders. Works on providing technical analysis, market news, free signals and more with follow up for at least 12 hours a day, and aims to simplify forex trading and the concept of trading for his audience.

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