Investors Can Still Sell Gold Before It Breaks Above 2,343

Jason

Summary:

Gold's uptrend remains intact but it will pull back in the near term.

SELL XAUUSD

Close Time

CLOSED

2326.00

Entry Price

2284.72

2350.00

4493.07 -155.65 -3.35%

240.0

Pips

Loss

2284.72

2350.03

Exit Price

2326.00

Entry Price

2350.00

Fundamentals

The market was relatively thin on Monday, but gold was volatile and overall moved upward. While the U.S. dollar index (USDX) rose briefly in the U.S. trading session, the gold price was not affected. It remained volatile at high levels and closed up 1.04%. Gold's rally on Monday was affected by geographical risks as Hamas and Israel fought again.

However, gold fell slightly on Tuesday not long after the opening as Hamas agreed to a ceasefire proposal which improved risk appetite in the market. Hamas leader Haniyeh informed Qatari Prime Minister Mohammed and Egyptian General Intelligence Director Abbas Kamel of the decision in separate phone calls on the same day.

However, Israeli Prime Minister Benjamin Netanyahu's office later said that Hamas' latest ceasefire offer did not meet Israel's requirements and a delegation would still be sent to meet with negotiators to try to reach an agreement. He added in the statement that Israel's war cabinet has approved the continuation of operations in Rafah.

In other words, the current cease-fire agreement has little impact on gold and may pull it back in the short term, but it's not enough to reverse the uptrend to the downtrend. Israel may withdraw its attacks on Rafah for some reasons later. At that time, investors may expect an incoming cease-fire agreement, thus weighing on gold.

Two Fed officials delivered speeches yesterday. They were the first officials to express their views this week, and their views were similar to those of Fed Chairman Powell's speech last week. To some extent, they were releasing signals to the market.

Richmond Fed President Tom Barkin said he is optimistic that the current interest rates can bring inflation down to 2%. At the same time, he does not think the economy is overheating. He added that the sort of slowdown needed to finish the Fed's inflation battle needn't be all that deep (still expecting a soft landing). With the strong performance of the labor market, the Fed has time to wait until it is convinced that inflation can continue to come down before cutting rates.

New York Fed President Williams said that they will eventually cut rates, and the monetary policy is in a "very good place". U.S. GDP this year is expected to increase by 2% to 2.5% (also expecting a soft landing).

Overall, the two officials' speeches complement each other, sharing the same view: to maintain the current level of interest rates in the short term and to lower interest rates when appropriate.

This is completely different from the previous speeches by Bowman and Goolsbee who held different views. Next, there will be several Fed officials to speak, and the market is trying to figure out the Fed's views on inflation and interest rates. The market now expects the Fed to cut rates by 25 basis points at its September meeting and expects a second cut to take place in December. Fed officials didn't oppose it may mean they agree to it or mean they have little confidence. As long as the market confirms from the officials' speeches or data that the next move is to loosen monetary policy, there is still room for gold to move up. Of course, this will take time and have no impact on the intraday movement of gold. As there is still a lack of important data today, gold may be temporarily affected by the expectation that a ceasefire agreement can be reached.

The Minneapolis Fed President Kashkari will speak today. We can see from the content of his previous speeches that he is a hawk. He has said if the disinflation process continues to stagnate, he would doubt the need to cut interest rates. If the economy, employment growth, and consumer spending continue to remain strong, he may further rule out the need to cut interest rates. The recent series of data may not satisfy this hawk, which means that his incoming speech could be hawkish again. Gold may expand its decline after Kashkari's speech.

However, if this big hawk is not that hawkish this time, though this is less likely to happen, interest rate cut expectations are expected may increase again, which will boost gold prices.

Technical Analysis

In the 4-hour chart, gold is moving in the downward channel. Strong support is at 2300. If gold breaks below this level, it will test the bottom of the downward channel (2275), where the bottom of the fluctuation range (2284.72) is also in its vicinity. It's hard for the gold price to fall below such a robust support zone. The strong resistance is in the 2335.42-2343 range. If the price breaks above this range, a new round of uptrend will begin.

As for indicators, the baseline and the conversion line of the Ichimoku Cloud are running horizontally, and the current price is temporarily supported by the conversion line, showing that gold is pulling back. We need to see whether the price can break below the conversion line. If it can, it will fall further. If not, gold may try to rebound. The +DI line of the DMI indicator has crossed below the -DI line and is located near 17.6, showing that gold will decline first before going up.

Overall, gold's uptrend remains intact but it will pull back in the near term. Considering that gold has fallen currently, investors can wait for a small rise before shorting gold.

Investors Can Still Sell Gold Before It Breaks Above 2,343_1

Trading Recommendations

Trading direction: Short

Entry price: 2326

Target price: 2284.72

Stop loss: 2350

Support: 2311.55, 2300.58, 2284.75

Resistance: 2326.92, 2355.42, 2343.06

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