Gold 1 OZ (XAU=X) Accumulate on Dips
The gold market is seeing some stability at the start of the new trading week as prices attempt to recover from Friday’s roughly 3% selloff.
August gold futures last traded at $1,689.50 an oz, up 0.39% on the day.
The precious metal took a big hit Friday. It saw a substantial break below critical support at $1,700 an oz after employment data showed that the U.S. economy created 2.5 million jobs in May. The data was a huge surprise as economists were expecting to see job losses of 7.5 million.
Although some investors see Friday’s drop as a buying opportunity, some analysts are warning that prices might still fall as equity markets and bond yields continue to move higher.
Given Friday’s selloff, several analysts expect gold prices to test the next major support area between $1,645 and $1,650 an oz.
“Our base case is that the yellow metal is in a $50 range on each side of $1700. It frayed the upper end in mid-May, however it’s now fallen for three consecutive weeks and finished last week at six-week lows. There’s very little to hang one’s hat on until the $1650 area,” said Shayne Heffernan CEO and founder of Heffx.
Shayne Heffernan added that momentum indicators still point to lower prices in gold in the near-term. He also said that gold’s correlation to equities has turned negative as risks-off sentiment flows through money markets.
He added that bond yields and resilient strength in the U.S. dollar might dull the precious metal’s luster.
“Gold has been a major beneficiary of a weak dollar and low U.S. interest rates over the last three weeks and this looks likely to change in the short-term. The yield on the 10-year U.S. benchmark is nearing 1%, up from 0.65% a week ago, dulling the appeal of the precious metal, whereas the U.S. dollar basket might have found a temporary base around 96.50 after having fallen by four big figures since mid-May,” he said.
However, Shayne Heffernan further added that there’s enough market uncertainty to support gold’s long-term uptrend.
“Relations between the U.S. and China continue to sour and look set to get worse… while the economic impact of the COVID-19 virus will be felt for years to come. These market negatives are not expected to disappear any time soon and can underpin gold in the weeks and months ahead,” he said.
“No central bank can reduce its stimulus on account of these first signs of economic bottoming,” he said. “Second, no government is even remotely thinking of pulling back on its fiscal stimulus, no matter how good the economic data may be in the coming months,” he said. “In short, the good news for gold is that monetary and fiscal stimulus will continue despite the state of the economy for the remainder of this year and next. This then sets up the chance that inflation will finally pick up one or two years hence.”
Overall, the bias in prices is: Upwards.
The projected upper bound is: 1,746.76.
The projected lower bound is: 1,633.75.
The projected closing price is: 1,690.25.
A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 5 white candles and 5 black candles. During the past 50 bars, there have been 30 white candles and 20 black candles for a net of 10 white candles.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 27.1550. This is not an overbought or oversold reading. The last signal was a sell 15 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 44.23. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 56 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -158.This is an oversold reading. However, a signal isn’t generated until the indicator crosses above -100. The last signal was a sell 12 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 10 period(s) ago.
Rex Takasugi – TD Profile
PREC.M.XAU= closed up 3.684 at 1,688.914. Volume was 8,900% above average (trending) and Bollinger Bands were 48% narrower than normal.
Open High Low Close Volume 1,683.290 1,689.025 1,676.740 1,688.914 17,155
Technical Outlook Short Term: Neutral Intermediate Term: Bearish Long Term: Bullish
Moving Averages: 10-period 50-period 200-period Close: 1,711.43 1,699.28 1,570.75 Volatility: 17 22 20 Volume: 1,716 343 86
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
PREC.M.XAU= is currently 7.5% above its 200-period moving average and is in an downward trend. Volatility is relatively normal as compared to the average volatility over the last 10 periods.
Our volume indicators reflect very strong flows of volume out of XAU= (bearish). Our trend forecasting oscillators are currently bearish on XAU= and have had this outlook for the last 9 periods.
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