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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 68% of retail investor accounts lose money when trading CFDs with this provider.
You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

A near term struggle for gold bulls to cut through as consolidation continues

Trading outlook:
Gold remains stuck in a medium term range between $1660/$1764. Consolidation is the name of the game for now as fundamental correlations are cancelled out and technical signals lack conviction. We still prefer the medium term range to break higher in due course, but for now this continues to play as a trading range.

 

 

Fundamentals/Newsflow

Broad market sentiment has entered a phase of uncertainty. It comes with gold also losing any sense of conviction.  This also comes with some mixed messages across the fundamental correlations.

Treasury yields have been ticking lower and reflects a mild safe haven bias, which gold should be supported by. However, this also comes as signs that the dollar has also been more supported in recent sessions too, which acts as a drag on gold. The dollar is still seen as a safe haven play and this is not helping gold to find traction.

So the near term movers of gold are being cancelled out and subsequently we see gold sitting tight in this range for the time to come.

No real driver from Treasury yields.

 

No real driver from the dollar.

 

The relative performance chart shows how gold is very flat over recent sessions, but also how the perceived safe havens of Japanese yen, gold and Swiss franc are the only markets trading positively versus the dollar over the past couple of weeks, but even they are broadly flat.

 

For now, gold is trading within a range, but we do still ultimately expect further upside in the longer term towards $1800 to be seen in due course. However the path to get there, with a  choppy near term outlook, could be tricky to navigate.

 

Support
  • $1712 – 17th June low
  • $1704 – 15th June low
  • $1692 – 9th June low
Resistance 
  • $1733 – 15th and 16th June highs
  • $1744 – 1st June high
  • $1754 – 20th May high

 

Technical Analysis

Several of the major (forex) markets we cover consistently have been lacking conviction recently, and gold goes into that category too. The past week has been one of false signals and sessions lacking conviction. A run of small candlestick bodies reflect this, where the last five closing levels have all been within $6. This has flattened out momentum indicators amidst this consolidation.

The argument would be that there is still a mild positive bias within the medium term range between $1660/$1764 and moves into $1700/$1720 seems to be still supported. However, the lack of conviction suggests caution is required. Will near term support continue to be found in the band $1700/$1720?

The hourly chart shows the outlook is all but flat, whilst consistent resistance between $1730/$1733 is being found. Hourly RSI struggling under 60 for the past week, along with hourly MACD lines stuck around neutral are the momentum reflection of this. We look for sustainable moves away from these positions to signal the next move.

Above $1733 we see the resistance of $1744 as a key medium term barrier. For a near term corrective move to take hold, a close below $1704 is needed. For now though, gold is struggling for real traction.

 

STRATEGY: As another rally within the medium term $1660/$1764 range has failed, the outlook has all but been neutralised once more. The time horizon for trading gold seems to be increasingly short term before retracements set in. Latterly we see intraday weakness into $1700/$1720 being supported. We still favour a long term breakout higher in due course and closing decisive above $1744 would suggest the bulls are finally preparing for a breakout. Below $1660 would be a key deterioration.     

 

 

Richard Perry

Richard Perry

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