Next Week's Outlook: Gold's Technical Indicators Show a 'Golden Cross'; Major Economic Data from the US and China to Arrive Next Week, Potentially Freeing Bulls from the $1800 Constraint
FXStreet wrote that the golden cross (50-day moving average has crossed above the 200-day moving average) has formed a bullish technical pattern. Although gold is still below the average moving average and momentum is pointing downwards, the upward support line that has accompanied it since the low in April 2020 has acted as a buffer. In addition, highs and lows have been steadily rising over the past few months. On the upside, there is some resistance at the July high of $1819. Following this is the $1830 area, where the two moving averages almost coincide. Further up, $1850 and $1919 will be the next levels to watch. On the downside, strong support lies at $1750, a level that has saved gold from two declines in recent months. Another double bottom is at $1678. Further down, $1565 is another noteworthy level.
Time:
2021-07-10 14:15
Friday (July 9th), when will gold break free from the $1800 level? Gold has been hovering around this level recently, and traders are wondering what will happen next. The chart shows Gold price is expected to rise further, and key US data will also have an impact.
Gold's performance this week: Falling US Treasury yields alone are not enough to drive a gold breakout
US Treasury yields have fallen sharply over the past week, puzzling many investors and supporting gold prices. Some explain that concerns about coronavirus variants will at least temporarily disrupt the economic recovery. Others point to a brief pause in new bond issuance.
Falling US Treasury yields make this low-yielding precious metal more attractive, but the correlation between these two asset classes – and with the dollar – has weakened. Later in the week, gold still received a small boost when yields eventually rose.
The impact of regulation also seems minimal. Basel III rules have been introduced in some jurisdictions, reclassifying the significance of paper gold to bank balance sheets. Financial institutions may only treat physical gold bars and coins as top-tier collateral, while indirectly held assets are downgraded.
There are currently two solutions – either abandon these indirect holdings, depressing prices, or exchange them for physical gold, thus increasing the value of gold. More than a week has passed, and it seems to have had no adverse effect on gold prices, leaving other factors to influence the price trend of gold.
Gold outlook for next week: Inflation takes center stage
Has US inflation accelerated? This is the main question facing markets such as gold. If the core Consumer Price Index (CPI) rises above 4% in June, the Fed will tighten policy sooner rather than later, starting with reducing the printing of US dollars. The central bank's reduction of bond purchases could put pressure on gold.
On the other hand, inflation may have peaked last month – possibly due to a weakening base effect, i.e., the sharp price falls in the spring of 2020. In this case, the Fed would be comfortable buying $120 billion in bonds for a longer period. Some of that money could flow into this precious metal.
Other events worth watching include China's second-quarter growth figures and US retail sales data for June. China is the world's second-largest economy, and the US is the largest – the latter's economy heavily relies on the former's production. Overall, improved data from both sides of the Pacific could cheer investors and support gold prices. Disappointing data could depress gold.
Gold Technical Analysis
FXStreet wrote that gold's golden cross (the 50-day moving average has crossed above the 200-day moving average) has formed a bullish technical pattern. While gold remains below the moving averages and momentum points downwards, the upward support line that has accompanied it since the lows of April 2020 has acted as a buffer. In addition, highs and lows have been steadily rising over the past few months.
On the upside, there is some resistance at the July high of $1819. This is followed by the $1830 area, where the two moving averages almost coincide. Further up, $1850 and $1919 will be the next levels to watch.
On the downside, strong support lies at $1750, a level that has saved gold from two falls in recent months. Another double bottom is at $1678. Further down, $1565 is another level worth noting.
Gold Market Sentiment
The bullish technical picture and the potential for falling yields due to inflation peaking could keep gold buyers in the market and help it break free from the "magnetic" $1800 level.
The FXStreet gold survey shows that experts expect gold to hold above $1800 in the foreseeable future. The previous week, experts expected gold to fall in the short and long term, while this week they expect gold prices to fall in the medium term.
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Although gold prices rose this week, market volatility has clearly increased. While the US-UK agreement is symbolic, its content is limited and insufficient to alleviate concerns about a global economic slowdown. Therefore, gold prices will continue to fluctuate between safe havens and policy signals, closely monitoring the Federal Reserve's interest rate expectations and global trade sentiment.