Gold prices experienced a volatile session on Thursday, July 30, ultimately closing higher after a sharp intraday recovery. The rebound was fueled by bargain-buying support at lower levels, even as geopolitical tensions eased somewhat, which weighed on the rally in oil prices.
Further supporting gold was a significant decline in the US Dollar Index, which fell sharply after coordinated intervention by Japan and the US to curb the yen's depreciation. This, combined with reduced expectations for a rate hike, provided a strong tailwind for the precious metal.
Despite the positive close, gold remains locked within its recent trading range. A bearish 'death cross' formation on the daily chart, where the 100-day moving average has crossed below the 200-day moving average, signals a risk of further downside pressure in the future. Until this bearish signal is reversed, any rallies are likely to be viewed as corrective moves within a broader downtrend.
On Thursday, gold opened at $4,065.54 per ounce, dipped to an intraday low of $4,028.35 in the early Asian session, and then staged a strong recovery. It rallied to a session high of $4,120.33 at the start of US trading before settling into a consolidation pattern. The metal closed at $4,102.98, recording a daily range of $91.98 and a gain of $37.44, or 0.92%.
Where to Focus Next
Looking ahead to Friday, July 31, gold has started the day with further strength, extending its two-day rebound. An early announcement from former President Trump stating that Hamas had agreed to a full disarmament and that Israel would withdraw troops has reduced geopolitical risks and inflation concerns, also providing support for gold. Furthermore, the US Dollar Index has fallen sharply for two consecutive days and remains below its 200-week moving average, creating a bearish short-term outlook that is supportive for gold prices.
Given these factors, gold is expected to trade in a sideways-to-higher pattern in the near term. Traders should watch for support at the middle Bollinger Band and nearby moving averages as potential entry points for long positions.
Key Economic Data to Watch
Today's focus will be on a series of US economic data releases, including the second-quarter Employment Cost Index, the Chicago PMI for July, the final University of Michigan Consumer Sentiment Index for July, and the final one-year inflation expectations reading for July. Based on recent data and market expectations, these releases are likely to be supportive for gold, reinforcing the strategy of buying on dips.
Technical Analysis: Gold
On the weekly chart, gold has been consolidating in a low range for several weeks, showing potential signs of bottoming. However, it remains below its 60-week moving average, and technical indicators continue to flash bearish signals without a clear shift to bullish momentum. The Bollinger Bands on the weekly chart are also tilting lower, suggesting that the market could either continue its sideways consolidation or face another leg lower.
In terms of strategy, traders can watch for support near the trendline at $3,960-$3,930 for potential buying opportunities. A more significant buying zone would be near the 100-week moving average around $3,650, which could offer a stronger bounce. On the upside, resistance is at the 60-week moving average of $4,180. A decisive break and close above this level would open the door for a move towards the $4,500 mark.
On the daily chart, gold has been oscillating within a one-month consolidation range, holding above a rising trendline. This suggests a potential base-building process. However, the bearish 'death cross' between the 100-day and 200-day moving averages indicates that any rallies are still corrective. Until this technical signal changes, traders should adopt a range-trading approach, looking for opportunities on both the long and short sides.
Near-Term Trading Levels
For gold, immediate support is seen at $4,080 and $4,050, while resistance lies at $4,140 and $4,170. For silver, support is at $58.40 and $57.60, with resistance at $60.20 and $60.80. Please note that these are preliminary reference points; actual entry and exit levels will be confirmed based on real-time market conditions.
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