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Summary: The gold market started the week with a slightly positive tone. While the gold price may not be significantly influenced by major safe-haven buying after Russia quelled the rebellion within 24 hours, gold remains an important diversification tool in the process.

Fundamentals

Last Saturday, armed mercenaries from the Wagner Group, led by Yevgeny Prigozhin, launched an armed rebellion and advanced into areas within 200 kilometers of Moscow. However, the speed at which the rebellion was quelled was almost as fast as its inception. Moscow reached an agreement with Prigozhin, exiling him to Belarus and granting amnesty to Wagner's professional soldiers.

With the failed coup attempt, gold prices may face some short-term selling pressure in the coming days as geopolitical concerns cool down, reducing gold's safe-haven appeal. Nevertheless, in the short term, the instability over the weekend should provide support for gold.

Meanwhile, from a technical standpoint, gold futures bears have a slight overall advantage in the near term. As investors continue to liquidate and lack stronger physical demand for gold, prices may further decline.

The daily technical chart shows a six-week downtrend in prices. The next upside target for bulls remains a solid resistance level of closing futures above $2,000. The next downside target for bears in the near term is breaking below the technical support level of $1,900. The first resistance level is at $1,950, followed by $1,964. The first support level is the overnight low of $1,931, followed by the June low of $1,919.

Technical Analysis

Gold continues to trade in the $1,919-$1,940 range, slightly above the 3-month low and about 7.5% below the all-time high of $2,079. Bulls are anxiously watching for a short-term bearish trend and a series of lower highs and lower lows.

The momentum indicators currently point toward the bears. The Average Directional Movement Index (ADX) is pointing to a bearish trend, the strongest since the adjustment in February-March 2023. The stochastic oscillator has just entered the oversold territory. Although it can stay in a limited range for a while, leading to lower lows for gold, it signifies the potential onset of another selling wave.

Should the bears decide to push the gold price even lower, they would quickly try to break out of the $1,920-$1,940 range defined by the September 6, 2011 high and the 100-day SMA. A break of that range would quickly shift the focus to below $1,900.

On the other hand, the bulls are looking to keep gold above $1,943 and gradually aim for the busier $1,959-$1,976 range where the January 6, 2021 high and 50-day SMA are located. If successful, they would have a chance to make higher highs and break the recent bearish pattern of lower highs, opening the door for another test of the $2,000 threshold.

Overall, the bulls are trying to put a temporary stop to gold’s freefall by defending the $1,920-$1,940 level, but the bearish momentum is still firmly in control of the market. In terms of strategy, it is recommended to go short at highs.

Trading Recommendations

Trading Direction: Short

Entry Price: 1930

Target Price: 1860

Stop Loss: 1964

Valid Until: 2022-07-10 23:55:00

Support: 1925, 1909, 1890

Resistance: 1943, 1950, 1964