The gold price has been dropping for three weeks at a stance. Last week’s FOMC was hawkish, and US T-bond rose sharply. As a result, safe-haven asset gold was in downside pressure.
What happened last week?
The start of the week saw a global turmoil cause market participants to seek refuge in safe haven assets like Gold, with the USD outperforming its risk-sensitive rivals.
Although this is not surprising due to intense flight from all other countries worldwide at that period, it did catch many off guards as they didn’t expect such behavior within America itself.
The Federal Reserve has declared that it would begin tapering its stimulus program at its next meeting. Chairman Jerome Powell explained the language in this statement for flagging a tapering could be met early, and it should end around mid-year 2022.
There’ll most likely not be another rate increase before then either way due to economic conditions like low inflation rates or high unemployment rates we’ve seen over time since 2007.
What about this week?
The US economic docket is always an exciting event to watch if you are a gold trader. On Monday, it’s the Durable Goods Orders data that should ring alarm bells. With August being such a low number and September coming up soon – Market participants will likely start doubting if there was any recovery at all in Q2 or not?
The Conference Board release of Consumer Confidence numbers for this month could be enough to send stocks tumbling down again if they don’t recover from last week’s losses first.
Finally, Thursday comes with two critical pieces: First up, we have news out by 3 pm EST (or immediately after), which tells us about how much Gains since Independence Day weekend our economy made, then just before midnight.
Price Index is a favorite measure of inflation for the Federal Reserve. It will be closely watched on Friday as fresh impetus before both ISM Manufacturing PMI and University of Michigan’s Consumer Sentiment Index data.
Investors will also watch US T- Bond yields movements as they move around critical supports or resistances to know where risks lie ahead. So, if we see the US bond rise again, there is no doubt that the Gold price will drop more in the upcoming days.
From the present rate, immediate strong resistance is identifying at the 1785/1787 price zone. In the daily chart, the gold price continuing the downtrend. So, we should hold our sell order until the market is below the 1785/1787 price zone.
Last week’s market closed price was 1750. And immediate descending channel resistance is identifying nearly 1758/1765 price zone. I think We can go for short from the descending resistance channel area (1755-17765). In this case, we should keep our stop loss at above 1787.
Our first downside target is the 1738/40 price zone. Breaking below 1738 may open the door for the 1720/1725 price zone. 1720 could be a correction zone. If the gold price breaks below the 1720 price zone, our final downside target is the 1780/1685 price zone.
On the other hand, if geopolitical and economic turmoil rises, the gold price may break above the 1787 price zone. Then we must go for the buy order. So, if we buy above the 1787 price zone, our upside first target would be the 1830/1835 price zone.
In the long-time frame chart, 1835 is critical resistance. So, I don’t think Gold can easily break this price. I expect the Gold price will go to downside correction from the 1830/1835 price zone again.
So, based on fundamental and technical analysis, it is safer to sell Gold for now.