Current Trends
The Gold/USD pair has returned to 2400.0, but this week's gold market is mainly influenced by fundamental factors.
First, the pair is reacting proactively to changes in the U.S. Federal Reserve's (FRB) monetary policy. The FRB might lower borrowing costs by 25 basis points as early as September. According to the CME Group's FedWatch tool, there is already a 91.7% chance that the FRB will turn "dovish" at the September 18 meeting. Additionally, U.S. President Joe Biden's decision to withdraw from the election race has heightened certainty of a rate cut within this year. This is because Donald Trump, a potential rival candidate, may return to the presidency, bringing his economic policies back into action.
Another reason for the temporary decline in the Gold/USD pair's price is the correction in the bond market. While traders are shifting from bond investments to metal and commodity assets, corrections are still recorded periodically. For instance, last Friday, the 10-year bond yield rose from 4.165% to 4.225%, and the annual bond yield increased from 4.842% to 4.905%.
The structure of CME futures and options positions also confirms the asset's volatility. Since July 17, the size of options positions has increased from 85.6 thousand contracts to 143.0-150.0 thousand contracts amid stable trading volume. This usually signals corrective fluctuations aimed at deriving high profits from short-term selling trades.
Support and Resistance
On the daily chart, the price is within an ascending channel in the range of 2480.0–2300.0.
Technical indicators are in a buy signal state, though their strength is weakening. The fast EMA of the Alligator indicator is approaching the signal line, and the AO histogram is forming corrective bars, staying above the transition level.
- Support Levels: 2385.0, 2290.0
- Resistance Levels: 2420.0, 2480.0
Trading Advice
- Short Positions: It is recommended to open positions targeting 2290.0 if the price stabilizes below 2385.0. Set the stop loss at 2430.0. The duration is more than 7 days.
- Long Positions: It is recommended to open positions targeting 2480.0 if the price stabilizes above the resistance level of 2420.0. Set the stop loss at 2390.0.
