|premium|

Gold, Chart of the Week: XAU/USD at a crossroads ahead of Fed, short squeeze on the cards?

Gold prices slipped on Friday even as treasury yields eased as the dollar rose. However, the price ended higher for the third straight week:

Gold weekly and daily charts

The wick leaves bullish prospects on the lower time frames as follows: 

However, let's take a step back.

Firstly, the US Dollar rose, making gold more expensive for international buyers at the end of the week and the third day of lower closes in the Gold price comes ahead of next week's two-day meeting of the Federal Reserve's policy committee.

The Fed is expected to end with a 25 basis point hike to US interest rates, although for most gold investors it is the medium to longer term that matters. But following reports that inflation and the economy are slowing, few expect the central bank to further raise rates this year and some have begun expecting it to begin rolling back its hikes in the new year.

''The Fed is widely expected to resume policy rate increases next week following its decision to pause in June. While we anticipate that July will bring the last rate hike of this cycle, we don't think the Committee is comfortable signalling that shift yet,'' analysts at TD Securities, however, argued. ''Indeed, Fed Chairman, Jerome Powell, will likely reiterate that an additional rate increase this year still holds.''

This leaves gold price at a crossroads on the charts and this can go either way. 

Let's delve into the charts: 

Gold, technical top-down analysis

On the 3-week charts below, we can see that the gold price has failed to make a higher high within the bullish cycle, so far...

if bears commit, then there is a risk of a significant downturn in the Gold price towards the dominant trendline support and to break key structure near $1,617. 

Gold price at a crossroads

Meanwhile, and coming back to the near-term outlook, we can see that the Gold price is at a crossroads:

The price broke last week's and month's highs but is failing to convince as the bears move in. the correction could be headed towards a test of the recent structural lows near $1,945:

Gold price, bearish outlook

Gold price bullish outlook

On the other hand, we could see the price regain its northerly trajectory and break to close above last month's highs. 

Gold price opening range expectations

To start the week on Monday, it is worth noting that we had a failed break of the week's and last month's highs on Thursday. This then resulted in two consecutive days of shorts and lower lows on the third day of lower closes. we also went on to break the prior day's and week's lows on Friday. All of this is giving us information:

1) Longs are trapped up high;

2) Shorts are in the money;

3) We had three sessions of drop on Friday that broke the prior week's lows.

This all points towards a short squeeze to trap bears for the initial balance from beneath the prior week's and Thursday's lows:

(15 and 30 min charts, above and below)

A break above $1,964 would create a market structure shift, MSS, and add conviction to the bullish bias for next week's opening.

Premium

You have reached your limit of 3 free articles for this month.

Start your subscription and get access to all our original articles.

Subscribe to PremiumSign In

Author

Ross J Burland

Ross J Burland, born in England, UK, is a sportsman at heart. He played Rugby and Judo for his county, Kent and the South East of England Rugby team.

More from Ross J Burland
Share:

Editor's Picks

GBP/USD dips below 1.3350 with bullish momentum losing steam

The British Pound ticks lower against the US Dollar Monday, attempting to close a seven-day rally, as tensions rise again in the Strait of Hormuz, one of the critical points in the peace process between Washington and Tehran. The GBP/USD pair trades near 1.3340 at the time of writing, down from 1.3387 highs last week, although it maintains a near-term bullish trend intact.

EUR/USD clings to daily gains, still below 1.1450

EUR/USD manages to shrug off the initial bearish tone and advances toward the 1.1440-1.1450 band on Monday, up modestly for the day. Meanwhile, the pair’s mild gains comes on the back of the lack of clear direction in the Greenback in quite an apathetic start to the week.

Gold remains offered below $4,200

Gold comes under fresh downside pressure on Monday, reversing three daily upticks in a row and meeting some initial resistance around the $4,200 mark per troy ounce. Safe-haven demand has shifted toward the US Dollar as renewed tensions surrounding the Strait of Hormuz weigh on market sentiment, limiting the precious metal's upside.

XRP extends decline as risk-off sentiment, fading retail demand weigh
Ripple (XRP) sustains losses on Monday, edging lower toward the short-term $1.10 support. XRP failed to sustain momentum above $1.20 on the previous day, prompting profit-taking amid a broader crypto market drawdown attributed to mild inflows into related digital investment products, declining retail participation and macroeconomic uncertainty.
The US Dollar just beat the Swiss Franc at its own safe-haven game

As the king among safe havens, the Swiss Franc is supposed to benefit from geopolitical shocks such as the Iran war. This time, it didn’t. The Swissie is nearly 6% below January’s peak against the USD after a sharp decline that came along with the war in Iran and the closure of the Strait of Hormuz.

Kevin Warsh offers no policy clues: Why markets still got their answer

Financial markets came to Sintra looking for clues about the Federal Reserve's (Fed) next move. They largely left with confirmation that Fed Chair Kevin Warsh intends to make those clues much harder to find.