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Fundamentals

In Friday's (July 21st) Asian session, spot gold dropped down narrowly, and it is currently trading near 1972. Overnight, the U.S. initial jobless claims came in below market expectations, and the market expectations on further Fed rate hikes increased. Moreover, both the USD and U.S. bond yields rose to one-week highs, sending gold prices lower and keeping them away from the previous massive resistance zone. The USD is testing the key level of 100.5, and gold has fallen to the 1965 key level. Although expectations of a pause in Fed rate hikes after the July meeting remain, geopolitical tensions in Russia-Ukraine, weather and conflict causing concerns of a global food crisis to rise, all will provide support to gold prices. However, short-term bearish signals have increased, and investors have to be careful that the gold price will peak soon.

Data: As of the week of July 15th, the number of seasonally adjusted initial jobless claims decreased by 9,000 people to 0.228 million, the lowest level since mid-May, and economists previously predicted that the number of initial jobless claims for last week was 242,000 people.

Today's key information: Japan National June CPI annual rate, Japan National June core CPI annual rate, Japan national core-core CPI annual rate, UK retail sales MoM rate (seasonally adjusted), UK July CBI distributive trades, UK Q3 CBI business confidence data, and Canada's May retail sales monthly rate.

Technical Analysis

Daily chart: Gold declined on Thursday, but it rebounded toughly by 23 USD in the end. As it was mentioned, the surge in gold price will make it independent from other precious metals. Thus, investors should not follow the appreciation as it comes from sentiments, and the trend is not following a technical way. Moreover, the market sentiment will change according to the USDX pattern, and gold may lose the previous gain. Besides, gold may depreciate slowly under oscillations based on the plunge on Thursday. Now, gold has returned to the 5-day SMA, and it will oscillate there. Nonetheless, from yesterday's falling-from-highs and the bearish divergence in the daily chart, gold will extend the retracement and decline slowly today. Therefore, the focus should be on the previous high and the situation in the 60-day SMA (1960-1963). If this position is maintained, gold will be bullish technically after a period of oscillations. However, if gold falls below the 60-day SMA, 1988 will be the peak for this appreciation, and gold may keep declining if the daily chart closed negatively on Friday.  

Trading recommendations: Keep the idea of slow retracements and depreciation on gold, and aggressive investors can buy lows and sell highs. If gold surges again to 1976-1978, investors can go short with small positions and set the stop-loss at 1982. To take profits, it is better to set the target as 1966, and refer to 1960 when investors move the stop-loss to breakeven. Furthermore, if gold falls again to 1960, aggressive investors can go long with small positions, and set the stop-loss at 1955. To take profits, investors can follow 1970 as the first target, and turn to 1980 when moving the stop-loss to breakeven.

Trading Recommendations

Trading direction: Long

Entry price: 1960

Target price: 1978

Stop loss: 1955

Support: 1960.000/1950.000

Resistance: 1978.000/1988.000