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Fundamentals

In Monday's (July 24th) Asian session, spot gold fell from highs, and it is currently trading near 1960. Last week's, the number of U.S. initial jobless claims was reported at only 0.228 million, which was worse than expected. Meanwhile, the market enhanced the expectation of the Fed raising interest rates after July, which supports the USDX and U.S. bond yields to rebound. At the same time, U.S. Treasury Secretary Yellen made disappointing comments about the surprisingly cooled inflation data for June, saying that the cooling of the labor market plays a key role in slowing U.S. inflation. In addition, housing costs and auto price pressure is also declining, and the prices will be cut down further. Therefore, investors shouldn't put too much weight on the June CPI data. Moreover, the dual constraints have pressured gold prices to give back some of their gains during the week. Nonetheless, the ascending trend for gold is unchanged now. Despite possible retracement, it is not likely for gold to reverse.

Today's focus: The PMI data for the U.S. and the Eurozone.

Technical Analysis

Daily chart: Regarding the gold trend, gold oscillated significantly last week. Last Monday, it plunged to 1945, and then rebounded on Tuesday and Wednesday, refreshing the new high to 1987. On Thursday and Friday, gold turned below and formed a consolidating decline area, and closed the session at 1962. Generally, gold appreciated slightly last week. Moreover, gold closed negatively after reaching the peak last Thursday and declined again last Friday, the continuous bearish pattern confirms a short-term turning of the trend. At present, the support is above the 10-day SMA (1960), and gold may get to 1945 if the retracement continues. There is space for the daily chart to plunge further, and it is highly possible that the Fed will raise interest rates by 25 bps in July, while such a long-term high interest rate level determines a future weak gold. Now, gold will maintain bearish this week, but it will not depreciate unilaterally until breaks below the 60-day SMA. Despite a descending trend, gold may not be depreciating entirely as it just tends to be weak at the beginning of this week. There will be rebounding later, and investors must be careful of the timing and space. It is important to focus on the resistance near the 5-day SMA (1970) shortly, while the further resistance should be near 1983. About the situation below, investors should consider the oscillation near the 60-day SMA (1960) with further support that may shift to 1955. If gold loses 1955 at the beginning of this week, investors should pay attention to the previous low (1945).

Trading recommendations: Keep the idea of slow deprecation and retracement. For aggressive investors, it is better to buy lows and sell highs within the range. If gold surges again and reach 1969-1970, investors can go short with small positions and set the stop-loss at 1975. To take profits, investors need to refer to 1960 as the primary target and move the stop-loss to breakeven at 1950. If gold plummets again to 1945-1950, aggressive traders can go long with small positions, set the stop-loss at 1942 and take profits at 1965.  

Trading Recommendations

Trading direction: Short

Entry price: 1970

Target price: 1955

Stop loss: 1975

Support: 1955.000/1945.000

Resistance: 1970.000/1983.000