Gold Technical Analysis: Trend is Still Bullish

Mahmoud Abdallah

At the end of last week’s trading, gold futures fell to the level of $ 1764 an ounce, after gains were the highest for the price of gold in a month. It closed the week’s trading stable around the level of $ 1775 an ounce. This decline came despite the fact that the price of the yellow metal is still on its way for weekly gains. Gold prices fell on the back of a massive US jobs report that doubled most market estimates, leading to anticipation of a hawkish policy tightening campaign by the Federal Reserve.

Will the price of XAU/USD touch the top of $1800 again this week?

The price of the precious metal recorded a weekly boost of about 0.5%, bringing its loss since the start of the year 2022 to date to about 2.1%. At the same time, the price of silver, the sister commodity to gold, fell to less than $20. Silver futures fell to $19.845 an ounce. Accordingly, the price of the white metal recorded a weekly decrease of 2.4%, adding to its loss in 2022 by about 15%.

The big story on Friday was the better-than-expected US jobs report for July. According to the Bureau of Labor Statistics (BLS), the US economy added a total of 528,000 jobs in July, more than double the market estimate of 250,000. The country's unemployment rate has fallen to 3.5%.

According to the advertiser, the average hourly wage increased by 5.2% on an annual basis, the average weekly working hours did not change at 34.6, and the labor force participation rate decreased to 62.1%. The employment snapshot was broad, with nearly every sector reporting job growth, led by leisure and hospitality, professional and business services, and health care.

The impressive US jobs report for July may force the Federal Reserve to push the trigger for a 100 basis point US interest rate hike at the Federal Open Market Committee (FOMC) meeting next month. Since the labor market can withstand the central bank's current tightening cycle, the Fed can withstand its rate increases and become more aggressive with a full point increase. This speculation has pushed the US Treasury market over the line, with the benchmark 10-year bond yield rising 15.6 basis points to 2.832%. One-year yields rose 15.6 basis points to 3.272%, while 30-year notes rose 10.8 basis points to 3.07%.

The rally rate environment is usually bearish for gold as it raises the opportunity cost of holding non-return bullion.

Other factors affecting the gold market

The US Dollar Index (DXY), which measures the performance of the US currency against a basket of major currencies, rose to 106.56, from an opening at 105.69. The gain erased its weekly loss and gave the DXY Dollar Index a weekly increase of 0.63%. Since the beginning of 2022 to date, the DXY dollar index has increased by about 11%.

Overall, a stronger profit is bad for dollar-denominated commodities because it makes it more expensive for foreign investors to buy.

In other metals markets, copper futures rose to $3.5525 a pound. And platinum futures rose to $926.20 an ounce. Palladium futures jumped to $2,128.50 an ounce.

XAU/USD Technical Analysis:

In the near term and according to the performance on the hourly chart, it appears that XAU/USD is forming the second bottom of the XABCD double bottom reversal pattern in an upward trend. This indicates that the bulls are trying to maintain a short-term control over the price of gold. Therefore, they will look to extend the current rally by targeting retracements around $1,785 or higher at $1,794 an ounce. On the other hand, the bears will look to pounce on earnings around $1,766, or lower at $1,756 an ounce.

In the long term and according to the performance on the daily chart, it appears that the price of XAU/USD is trading within the formation of a descending channel. This indicates a significant long-term bearish momentum in market sentiment. Therefore, the bears will target long-term profits at around $1,724, or lower at $1,678. On the other hand, the bulls will look to pounce on profits at around $1,822 or higher at $1,870 per ounce.

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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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