Market data released early Monday morning showed China continued to add to its gold reserves. Russia and China are the two top countries of gold purchases in the last decade. These purchases are expected to continue and will provide a medium-term basis for a push to the $1,500/ounce level.
On the flip side, gold prices may start to face some headwinds on the back of reduced bets for a US rate cut. Following June’s strong rally, gold prices are now trading in a range as it struggles for direction. This is coming on the heels of a strong US nonfarm payroll reading on July 5, which has dampened expectations of US rate cuts even as Donald Trump continues to goad the Federal Reserve into starting a round of easing come its next meeting in July.
Technical analysis at the moment suggest the following:
There has to be a sustained break of the ascending trend-line support at the $1,390 – $1,399 price area, confirmed by a double candle close below this support level or a 3% penetration close below the support line, for the door to be open for a move to the next swing low at the $1,380 level. This play would call for a short trade below $1,394 targeting $1,380 with a SL at $1,401.
Conversely, the upward move would resume if increased buying interest pushes prices above the $1,407 price level, the intraday resistance provided by the 50-hourly-SMA. If this occurs, then I think buying interest will start at $1411, with traders targeting $1,423, and traders seeing a break to the $1402 – $1,405 interval as a reason to give up on their bullish bias.
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