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Fundamentals

During the Asian session on Friday (July 28), spot gold fluctuated to the upside and is currently trading around 1950. The GDP data released overnight greatly exceeded expectations, hitting investors' speculation about the Fed’s relatively dovish monetary policy. Bond yields rose after the strong US economic data. Meanwhile, the dollar strengthened on Thursday and gold prices weakened, which slipt more than 1% to a two-week low, forming another weakening state. Although this is a big downturn, the process is indeed tempting. When the Fed announced the interest rate hike, gold still rose at a slow pace. However, as the released economic data was larger than expected,  gold plunged. Besides, what we should notice is that the core inflation last night showed a sign of rapid decline, which also limited expectations of the next rate hikes.

Data: The preliminary value of US annualized real GDP in the second quarter rose 2.4% MoM, compared with the expected 1.8% and the previous value of 2%. Personal consumption expenditures rose 1.6% from the preliminary value of the previous month, up 1.2% from the expected and up 4.2% from the previous month. The preliminary value of annualized core PCE price index rose 3.8% YoY, up 4% from the expected, and 4.9% from the previous month. US durable goods orders in June increased by 4.7% MoM, which is not only the fourth consecutive month of rising but also record the largest growth rate in half a year that far exceeded market expectations. US jobless claims for the week ended July 22 were 221,000, which record a five-month low and a single-week low in nearly five months, compared with the expected 235,000 and the previous value of 228,000. In addition, the ECB raised all three major interest rates by 25 bps, which is the ninth consecutive rate hike, and reach their highest level since September 2008, meeting market expectations.

Data for investors to focus on today are the US PCE Price Index YoY for June and US Personal Spending for June.

Technical Analysis

Trading at the daily timeframe, the price generally remained in a state of high oscillation last night, testing the resistance around 1982 at a high. However, the US GDP data didn’t fall but rose in the evening, leading to the surge in market expectations for another Fed rate hike. As a result, gold plunged back down sharply and finally paused until hit the 1942 line below. However, the market maintained a low oscillation in the second half of the night, and the daily chart closed a large black body which engulfed the previous positive trend. Therefore, the conversion of the bulls and bears in the short term has been determined. At present, although the overnight decline has not fallen below 1940, the decline is large enough. Moreover, from the weak state of the price rebound in the second half of the night, the qualitative change in market sentiment in the short term is greatly affected. The 4-hour cycle chart has also formed a head and shoulders top pattern, and the price has performed a double top suppression. Perhaps the future market will complete the big fall of the head and shoulders pattern, Therefore, traders should be bearish on gold and major in taking short positions recently. During the day, as the gold plummeted on Thursday, today will extend the weak trend and continue to be bearish. Gold temporarily suspended its decline in the 1942-40 area during the day, note that it is a pause in decline. However, it is important to realize at the same time that there will be a certain rebound after a short-term overselling. The upper resistance is in the 1955-1960 zone.

Investors are advised to buy low and sell high in the range. If the price rebounds to the MA5 at 1958, you can try to go short with a small position. The stop loss is set at the 1963 line. Investors can take profit step-by-step, we should first focus on the 1945 line, where you can reduce production and move your stop loss to break even. Then, investors are able to focus on the 1935 line. If the price falls sharply to 1935, aggressive traders can also test long with a small position. However, traders should make sure to trade with extremely small positions and not make multiple trades or increase positions. The stop loss is at 1930, and the target to take profit focuses on the 1950 line.

Trading Recommendations

Trading Direction: Short

Entry Price: 1958

Target Price: 1945

Stop Loss: 1963

Support: 1942.000/1935.000

Resistance: 1958.000/1963.000