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Summary: Gold prices ended the first half of 2023 far from the levels seen at the beginning of the year. Market sentiment suggests that due to the ongoing resistance, gold is expected to continue its downward trend.

Fundamentals

While the current sentiment regarding gold is balanced between bullish and bearish, the latest Kitco News Weekly Gold Survey indicates that retail investors remain bearish. The online poll received 845 votes, with 314 respondents (37%) expecting gold prices to rise next week. Another 374 voters (44%) expressed a lower expectation, while 157 voters (19%) remained neutral.

This week, 21 Wall Street analysts participated in the gold survey. Among the participants, eight analysts (38%) voted for a bullish outlook, and eight analysts (38%) voted for a bearish outlook, resulting in a tie. Meanwhile, five analysts (24%) believed that prices would consolidate.

As robust economic activity continues to support risk assets, it is not surprising that investors are gradually moving away from gold.

The anticipation of a stronger U.S. dollar and rising U.S. interest rates, which aligns with the solid expectations for the upcoming U.S. jobs report on Friday, contributes to this shift. However, the momentum indicators for gold appear to be bottoming out, and the potential "inverted hammer" formation on June 29 suggests a possible rebound in gold with a target range of $1,930-$1,934. Once the market reaches that level, we lean toward selling as potential driving factors such as U.S. interest rates and the U.S. dollar are expected to come into play again.

Overall, the main drivers for gold have remained largely unchanged. Like in previous quarters, gold is still primarily influenced by the direction of the U.S. dollar and U.S. interest rates. Specifically, gold tends to move inversely to the U.S. dollar and interest rates. Therefore, whenever the U.S. dollar strengthens or U.S. interest rates rise, gold tends to weaken again.

Technical Analysis

In the past month, gold prices have been in a downward pattern characterized by bearish retracements. However, on the last trading day of June, bears managed to push the price below the $1,900 range. Nevertheless, gold quickly found support and rebounded, suggesting that this decline may have been a false breakout.

Despite the recent rebound, short-term oscillators do not provide positive signals for investors. The RSI remains below the neutral line at 50, while the MACD remains below the 0-axis.

If the bulls attempt to move higher, the lower range boundary at $1,934 could act as a resistance to any further upside attempts. Breaking above this level, the bulls may try to surpass the restrictive trendline connecting recent price highs and retest the neutral starting point at $1,940. Further upside may be capped around the $1,950 level; otherwise, the downtrend will remain intact.

If the recent bearish structure continues, prices could once again break below the psychological level of $1,900 and challenge the recent three-month low at $1,893. Breaking below that level, gold prices may retreat towards the resistance zone at $1,860, which also coincides with the 200-day SMA. A breakthrough in that area could pave the way for a retest of the bottom reached in 2023 at $1,804. (But this scenario is less likely.)

Overall, as the end of the month seems to have successfully halted the downward momentum, gold prices are preparing to retest the $1,934 level, which marks the lower limit of the upward trend. Failure to significantly break above this range may lead to a continuation of the downtrend. Going short at highs is recommended as the main strategy.

Trading Recommendations

Trading Direction: Short

Entry Price: 1933

Target Price: 1860

Stop Loss: 1964

Valid Until: 2023-07-17 23:55:00

Support: 1920, 1910, 1900

Resistance: 1934, 1940, 1950