On July 27, last Friday, we noted that escalating Middle East tensions drove oil prices to new one-month highs, fueling inflation concerns. This strengthened expectations of a Federal Reserve rate hike, supporting the US dollar and pressuring gold prices. Short-term technical indicators also showed that gold faced resistance after its rebound, suggesting a need for correction. Therefore, we recommended focusing on support at $4,040 and then $4,000, with resistance at $4,070 and then $4,100.
Following the subsequent moves, gold traded in a sideways range of $4,040 to $4,050 during Friday's Asian session. After multiple tests, the price broke below the short-term support of $4,040, quickly dropping to $4,023 before stabilizing. It then continued to consolidate at lower levels, repeatedly finding support at $4,022. During the European session, gold rebounded to $4,063 before facing resistance. In the US session, it further hit a daily high of $4,082, but after meeting resistance, the price pulled back and closed the day as a bullish doji candle on the daily chart. Overall, gold remained within the $4,000 to $4,100 range we anticipated.
Wolfinance star analysts believe that gold's overall trend last week was a rebound followed by a pullback. This was primarily due to the escalating military conflict between the US and Iran, which led to the closure of the Strait of Hormuz. Concerns over energy supply disruptions supported oil prices, which hit new one-month highs. High oil prices fueled global inflation fears, strengthening bets on a Fed rate hike this year. This supported the US dollar, which hit a three-week high, while a strong dollar weakened the appeal of non-yielding gold, causing its rebound to stall and correct.
This Monday, gold opened with a gap higher, currently trading around $4,093, as it tests the $4,100 psychological resistance level. This is mainly due to the US suspending its military strikes against Iran over the weekend, with Iran indicating a reciprocal pause in attacks. This de-escalation could weigh on oil prices and provide support for gold prices.
On the daily chart, gold's rebound has met resistance, indicating strong overhead pressure. The price continues to trade in a sideways range. Downside support can be seen at the middle Bollinger Band of the daily chart at $4,070, followed by the $4,040 level where gold repeatedly found support on Friday, and the $4,000 psychological level. Upside resistance can be watched at the $4,100 psychological level, which the price is currently testing. A breakout above this could see resistance at Thursday's high of $4,140, and the upper Bollinger Band of the daily chart near $4,180, which also aligns with the weekly MA10 moving average.
The 5-day moving average and the MACD indicator are forming a bullish crossover, while the KDJ and RSI indicators are also showing a bullish crossover with upward momentum. Short-term technicals suggest gold has room for a rebound.
Gold intraday reference: The suspension of military strikes between the US and Iran supports a short-term rebound in gold. However, market concerns over high inflation, which strengthen expectations of the Fed maintaining high interest rates, may limit the upside potential. The recommended approach is to treat the market with a range-bound bias. Downside support can be watched at $4,070, followed by $4,040 and $4,000. Upside resistance should focus on the breakout of $4,100. If gold can break and hold above this level, the next targets to watch are $4,140 and $4,180.
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