Commodities received a renewed lease of life yesterday on the weakening of USD, allowing price to push above 1,400 for Gold and 94.0 for WTI Crude. However just like how Crude oil wasn’t able to break 95.0, Gold similarly fell short of the 1,420 level, the same level which it has failed to conquer back on 31st May.
4 Hourly Chart
From a technical perspective, price does need a significant bullish to overcome the resistances that currently lies overhead. On top of the dreadful 1,420, bulls have to break the rising trendline confluence if price attempts to move higher in the next 1-2 candles. Furthermore, Stochastic readings appears to have formed an interim peak with a Stoch/Signal cross, with the Stoch line pointing lower right now. Current stoch levels are also fairly close to the previous Stoch level back on 3rd June, with price levels mirroring as well. If past patterns repeat themselves, current bulls will not stand a chance pushing above 1,420 based on technicals.
Weekly Chart shows that both the Channel Breakout and the Triangle breakout remains in play. Weekly Chart face the same problem as the Shorter term 4 Hourly where there is a strong confluence between the significant resistance level and the descending Channel Bottom. However, stochastic readings on Weekly appears to be more bullish with a Stoch/Signal cross pointing higher.
Fundamentally, we could be seeing a bottom of Gold, at least where demand is concern. Demand for Physical and ETF gold are starting to pick up, but overall YTD demand remains lower than last year, with outflow of funds from both physical and ETF exchanges. If this rebound in demand can last the distance, we could potentially see Gold price bouncing up above 1,420-1,430, back into the descending channel and potentially aiming for the Channel Top around 1,530. With global stocks looking shaky, this is the best chance for Gold to shine and hopefully invite risk averse flows into it. However, with USD potentially strengthening on the back of weaker stocks, there is a chance that both effect will cancel out, with will put price in limbo around current levels.
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.