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Abstract: As bond yields and the USD continue to rise, the gold market remains under pressure; At the same time, the market continues to be in trouble, because the transactions supporting gold are still being further liquidated.

Fundamentals

The latest market report released by the World Gold Council on Tuesday showed that global gold ETF market holdings stood at US$4.9 billion at the end of July, a cumulative decrease in holdings of 84 tons. This month, it decreased by 34 tons, valued at $2.3 billion. This is the fourth consecutive month that the gold market has been liquidated.

Judging from the regional distribution of capital outflow, the performance of European-listed funds is slightly weaker than that of the North American market. According to the report, 18.5 tons of gold worth US$1.31 million flowed out of Europe; At the same time, the positions of products listed in North America decreased by 16.3 tons or nearly USD$986 million.

However, as prices remained resilient, assets under management actually increased by 2 % to US$215 billion.

The monetary policies of the central banks of the Federal Reserve and the European Central Bank (ECB) continue to dominate the investment demand of the gold market. However, the Fed is expected to be close to the end of its tightening cycle, which provides some support for gold prices.

The Federal Reserve raised interest rates by 25 basis points in July, but with the recent weak inflation data, investors expect the current tightening cycle of the Federal Reserve to end soon. Although this expectation supports the price of gold, it also promotes the risk preference (such as the rise of the dollar) to suppress gold.

Now, everyone will pay attention to the July inflation report released by the U.S. on Thursday, because a calm report may help support the hope of a soft landing and convince some people that the Fed has raised interest rates. Now the market's expectation for the inflation report in July is that the overall inflation will rise to the middle range of 3%, while the core inflation will remain stable and at the lowest level since 2021. The monthly inflation rate is 0.2%, compared with 4.8% in the same period last year. Any major accident may strengthen the case that the Fed may need to raise interest rates at its November meeting.

Technical Analysis

In last week's trading, gold prices struggled to break above the US$150 resistance level and entered the bearish zone.

This week, it shows that in the 4H timeframe, gold prices continue to close below US$1,940, the 100 SMA, and the 200 SMA, forming a lower low, and the current price is consolidating the decline. The direct resistance is near the US$1,935 area. In the 4H timeframe, a main bearish trend line has also been formed, and the direct resistance level is also around US$1,935.

If the bulls can break through this resistance level, the next main resistance level is around US$1,950, that is, from the fluctuation high of US$1,971 to the 50% Fibonacci retracement of the downward trend of US$1,923. If the bulls break through this level, the price may test the range of US$1,960.

Any further rise could push the price toward the resistance level of US$1,975. On the contrary, the price could fall further from the current level. Initial support is located near US$1,916. The next major support is at US$1907, where the 200-day SMA also provides a cushion for gold prices. If bulls fail to hold this level, there is a risk of a sharp decline. In the above scenario, prices could fall to the psychological threshold of US$1,900.

Overall, gold prices have stayed under pressure since the beginning of the month, failing to rebound as much as they should have at the starting point of several rebounds, but not accelerating their decline either, as they seem to be waiting for the data to develop. In the meantime, price corrections and average reversion could be the next price trigger, something the bulls have been looking for to try and get their way. It is recommended to buy the dips.

Trading Recommendations

Trading direction: Long

Entry price: 1917

Target price: 1960

Stop loss: 1897

Deadline: 2023-08-23 23:55:00

Support: 1916, 1912, 1902, 1990

Resistance: 1932, 1935, 1948, 1950