On Tuesday, July 1st, gold prices opened lower during the early session, finding support around 3942 before beginning a steady rebound. By the afternoon, the price surged to 3997, encountering initial resistance at the 4000 level and starting to pull back. However, the downward momentum was not particularly strong, with the move covering about 20 dollars, bottoming near 3975 before stabilizing. Subsequently, a strong bullish hourly candlestick emerged, propelling the price directly above the 4000 mark, reversing the prior downtrend. The upward move continued after breaching 4022, reaching a high of 4063, but failed to sustain the gains, ultimately resulting in a pattern of rally followed by retreat.
The previous day's view was to sell below 4000, and the initial entry could have captured nearly 20 dollars. However, the subsequent break above 4000 clearly signaled the end of the bearish move. It is crucial to remember that the first sign in a weak market is a failure to break above previous highs and a reluctance to test them. As often stated, in a weak trend, prices do not breach highs; lower prices reinforce the trend's stability. Do not wait for prices to become "high enough"; in practice, you either miss the entry or find the trend has already shifted when a good level appears. Once the 4000 level was breached, it indeed led to further upward extension.
Following a late-night surge and subsequent decline, gold prices have once again fallen below the 4000 dollar mark today. How should we interpret today's market action? As previously analyzed, the 4000 level remains pivotal. A sustained move above this threshold would be viewed as a strongly positive signal. Conversely, a loss of the 4000 level would lead bearish participants to believe the downtrend is set to continue.
European Session Strength is Key
The strength or weakness displayed during the European trading hours will be a critical signal. Today's morning decline initiated from around 4018 dollars. Under a bearish structure, the rebound should not be too extensive. Using 4018 as the bearish defense level, look to sell on any rebound approaching the 4000 area, targeting a move of 40 to 50 dollars. If the price manages to break below the recent low near 3960, do not wait for an ideal selling zone to materialize. Instead, consider an active short position, using resistance near the 4000 level as your defensive point.
Comments