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Gold buyers vs USD buyers. Who is going to take over?


Gold traders remained active in the past days, with notable price movement on Friday and Monday for the metal. The moves could signify further Gold price activity, while this post will be an overview of the most important fundamentals and technicals related to the Gold market.

Technically, the price of gold bounced from a solid support level (check the chart below), exactly where our buy trade is from the previous Gold market analysis. My wave counting is giving me a strong buy signal. Chart patterns are still showing the same thing – Inverted Weekly Head and Shoulders. Yes, price action is looking bullish, but there’s a lack of stamina in the bullish moves. And the only thing I believe is slowing the Gold price down is strong USD. 

At the moment, the financial markets are reacting to the uncertainty over the latest virus concerns. The spread of Covid-19 variants is forcing some countries into a widespread tightening of restrictions on movement. The markets may not be focusing so much on what is happening at the moment but rather on the upset that seems to follow due to expectations on improved economic and lifestyle circumstances that could be postponed. 

Gold has been up in the past four consecutive weeks creating new highs. Even though the panicky reaction of the market on Monday the 19th pushed Gold prices higher, the precious metal did not break to a new weekly high, for the time being, possibly leaving this scenario in for the following days.

 In addition, the negative reaction from investors and analysts on Monday was felt across the board, with the USD breaking to a new monthly high according to the dollar index, the major US stock markets losing very notable ground, and most importantly, US bond yields dropping. 

Bond yield movement, which tends to indicate investors’ confidence while on the high and the opposite when on the low, was in the epicentre of the markets on Monday. 

The yield on the 10-year Benchmark Treasury note posted its biggest one-day decline since March. Dropping bond yields can be a major source of support for Gold traditionally. Thus the yellow metal gained ground during the US session on Monday. Yet very characteristic was also the relationship between the USD and Gold, which seem to be currently positively correlated. This can be a sign that both are used as a safe haven resort for investors. 

We cannot stress enough the importance of monitoring important economic data in the coming days as in the past, Gold was seen as responding to figures. 

On Friday the 16th of July, the US Retail Sales figure for June may have overwhelmed traders as the figure moved from negative to positive territory. 

On Friday, as the US session market progressed, Gold fell by about $12. In this case, the bears got the best of the market, yet the lesson is that opportunities can arise from the most simple to the most complicated economic releases. 

Looking towards the days ahead, some economic releases from the US could be seemingly fit for Gold traders to use when engaging the market.

 Starting on the 22nd of July, we get the weekly Initial Jobless claims figure and the US Existing Home Sales figure for June.

 Moving to the 23rd of July, which can be considered a key day for traders, the Preliminary Markit US Manufacturing and Services PMI figures for July will be coming out. We expect the market to anticipate the readings with great interest. 

On the 26th of July, we get the US New Home Sales for June, and on the 27th, we get the Durable Goods for June and the US Consumer Confidence for July, which is a rather important indicator.

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