- Gold price bounce after defending key support around $1798 once again.
- Markets remain cautious ahead of the crucial Fed decision.
- Gold bears await break below 100-day SMA at $1,796
Update: Gold maintained its bid tone through the early European session and was last seen trading near the top end of its daily range, around the $1,805 region. The risk-off impulse in the markets – as depicted by a generally negative tone around the equity markets – continued acting as a tailwind for the safe-haven precious metal. Investors remain worried about the potential economic fallout from the fast-spreading Delta variant of the coronavirus. This, along with China's regulatory crackdown, further took its toll on the global risk sentiment.
However, a combination of factors kept a lid on any runaway rally for gold, at least for the time being. The US dollar was back in demand amid a modest uptick in the US Treasury bond yields. This, in turn, was seen as a key factor that capped gains for the dollar-denominated commodity. Investors also seemed reluctant to place any aggressive bets ahead of the key event risk – the conclusion of a two-day FOMC monetary policy meeting. The outcome will assist market participants to determine the near-term trajectory for the non-yielding gold.
Even from a technical perspective, gold has been oscillating in a range over the past one week or so. Given the recent failure near the very important 200-day SMA, this further makes it prudent to wait for strong follow-through buying before positioning for any further appreciating move.
Previous update: Gold price is rising back above $1800, defending the key support area around $1798 amid a cautious market mood heading into the Fed decision. The sell-off in the Chinese stocks seems to have paused, offering some support to the Asian indices, although surging covid cases in Asia remain a drag on the investors’ sentiment. A retreat in the US Treasury yields and the risk-off mood is boding well for gold price. Meanwhile, the US dollar holds the lower ground amid downbeat US Durable Goods data and pre-Fed repositioning.
All eyes remain on the Fed decision, as markets bet on a hawkish signal from the world’s most powerful central bank. The Fed is expected to hint at a likely taper starting off from the final quarter of this year.
Gold Price: Key levels to watch
The Technical Confluences Detector shows that gold has managed to defend powerful support around $1798, which is the convergence of the Fibonacci 61.8% one-day, Fibonacci 23.6% one-week and SMA100 one-day.
Acceptance below that level could revive the bearish interests, calling for a test of the previous day’s low at $1794.
Further south, the intersection of the previous week’s low and Fibonacci 23.6% one-month at $1791 will be a tough nut to crack for gold bears.
Alternatively, if the buyers need to find a strong foothold above the key resistance at $1805 to unleash further upside. That level is the confluence of the previous day’s high and Bollinger Band one-hour Upper.
The relevant upside target appears at $1812, where the SMA10 one-day, Fibonacci 61.8% one-week and the pivot point one-day R2 merge.
The bulls will then look to take out the Fibonacci 38.2% one-month at $1814.
Despite the renewed bids, it's going to be a bumpy ride for gold bulls.
Here is how it looks on the tool
About Technical Confluences Detector
The TCD (Technical Confluences Detector) is a tool to locate and point out those price levels where there is a congestion of indicators, moving averages, Fibonacci levels, Pivot Points, etc. If you are a short-term trader, you will find entry points for counter-trend strategies and hunt a few points at a time. If you are a medium-to-long-term trader, this tool will allow you to know in advance the price levels where a medium-to-long-term trend may stop and rest, where to unwind positions, or where to increase your position size.
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