On Tuesday, July 8th, the market view was that with the approaching Federal Reserve meeting minutes, market participants were turning cautious. After gold's rebound met resistance, its price action entered a phase of consolidation and adjustment. Short-term technical indicators also suggested that, following a temporary failure to extend gains, gold was exhibiting a need for correction. Consequently, for trading strategies, it was advised to monitor support levels around $4100, followed by $4070. On the upside, resistance was noted around $4142; a sustained break above this level would shift focus to $4168, and then $4200.
Subsequent price action saw gold, during the European session on Tuesday, successfully break through the resistance near $4142 after multiple tests and, holding above that level, extended its advance to reach a daily high of $4180. After encountering resistance there, the gold price retreated in a choppy manner, finding a daily low around $4092 where it stabilized. At the opening on Wednesday, gold tested Tuesday's low area multiple times and found support, rebounding to $4134 before meeting renewed resistance. During the European session, gold broke downwards, establishing a new daily low at $4041 and is currently trading around $4045. Overall, gold's pattern of surging then retreating during Tuesday's US session continued into Wednesday, with short-term fluctuations indicating an ongoing adjustment phase.
Analysis suggests that disappointing US employment data last week, indicating a substantive cooling in the labor market, coupled with dovish-leaning commentary from the Federal Reserve Chair regarding receding inflation risks, dampened market expectations for further Fed rate hikes. This initially propelled gold prices higher from six-month lows to fresh one-week highs. However, gold has trended lower this week, declining for three consecutive sessions. This pullback is attributed partly to market caution ahead of the Fed minutes, and partly to escalating tensions around the Strait of Hormuz, which have supported a significant rally in oil prices over the last two sessions. Higher oil prices are seen as potentially reigniting inflation concerns, which could compel the Fed to maintain higher interest rates for longer. This dynamic supports US dollar strength and exerts downward pressure on gold. Looking ahead, market focus will be on the upcoming Fed meeting minutes and the latest developments in the Middle East situation. A hawkish Fed stance or further oil price gains driven by Middle East tensions would both be unfavorable for gold prices.
On the daily chart, gold has retreated from its one-week high, marking a third consecutive day of declines, indicating weak short-term momentum. For support, the intraday low around $4040 is key; gold has stabilized tentatively after breaking below previous levels. Continued pressure could see a test of the psychological $4000 level. A break below this would increase the risk of a deeper short-term correction, potentially targeting the vicinity of the recent six-month low near $3940. On the resistance side, focus is on the 10-day moving average around $4080, followed by the $4100 level. A sustained move above $4100 would alleviate near-term downward pressure, with further resistance expected around the daily Bollinger Band middle line at $4140, which is also near the day's high. The golden cross in the 5-day moving average and MACD indicator is slowing, while the golden crosses in the KD and RSI indicators are turning down, approaching a potential bearish crossover. These short-term technical signals suggest gold faces continued risk of a corrective pullback.
Intraday Gold Outlook: Escalating Middle East tensions have driven a sharp rise in oil prices this week, exacerbating inflation concerns. This provides a rationale for the Federal Reserve to maintain its tightening stance, supporting US dollar strength and directly pressuring gold prices. A range-trading approach is recommended for operations. Downside support can be monitored at $4040 and $4000, followed by $3940. Upside resistance can be watched at $4080 and $4100, followed by $4140.
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