If Gold breaches the 58720 level, then sellers will have the upper hold and may drag prices till 58400-58000. The high of the candle is seen at 59680 which will now act as resistance.
By Bhavik Patel
It was an eventful week with plenty of data along with the US Fed meeting, ECB, and BOJ monetary policy meeting. The Federal Reserve’s 25 basis-point interest rate rise from Wednesday afternoon was largely digested by Thursday. The markets had no significant reactions to Fed Chair Powell’s comments at his news conference, which were regarded to be neither too hawkish nor too dovish. Some Fed observers believe the central bank has completed its cycle of rate hikes, while others believe the Fed will raise rates again in November. However, action in gold started during the commencement of the ECB policy. The euro came under pressure against the dollar due to the European Central Bank’s decision to adopt a more data-dependent policy, which has led to a session low in gold prices. At one time, gold breached its support of $1950 before recovering back above that level.
Following the ECB decision and Lagarde’s comments, many economists expect that the central bank will raise interest rates one last time in September as it holds interest rates at an elevated level through the rest of the year. Slowing the European economy will create some challenges for the central bank in its current tightening cycle. The final nail in the coffin for gold prices was strong US advance GDP numbers. The first estimate of second-quarter U.S. gross domestic product came in at up 2.4%, year-on-year, which beat market expectations for a rise of 2.0%. U.S. durable goods order was reported up 4.7% in June versus expectations for a 1.5% gain. This data significantly increased U.S. Treasury yields and the dollar index, both of which are negative factors for the precious metals.
Gold on the daily chart made a ‘Bearish Engulfing’ chart pattern which is negative but the significance of it is low as the pattern emerged when the gold market is consolidating and not emerging at the top end of the range. If the pattern had come at the top end of the range, we can view it as a reversal signal. Right now the candle’s low will be very important support which comes around 58720. If Gold breaches that level, then sellers will have the upper hold and may drag prices till 58400-58000. The high of the candle comes at 59680 which is now resistance and any upside momentum is expected only when the price breaches the resistance of 59680. In essence, gold is expected to trade in a range of 59500-58500 and further direction may only come if the price breaks the range on either side.
(Bhavik Patel, Commodities and Currencies Analyst, Tradebulls Securities. Views expressed are the author’s own. Please consult your financial advisor before investing.)
Source:financialexpress.com