Gold Tries to Counter USD Strength

At the end of last week’s trading, gold prices showed amazing flexibility, as they were able to close the session almost steady despite the large rise in real yields and the resulting rise in the value of the US dollar, which is usually detrimental to the precious metals.

The price of an ounce of gold rose in that session to the resistance level of $1953 before closing the trades stable around the $1940 level amid a strong injury to the US dollar despite the difference in the US jobs numbers. The strength of the US dollar continued with the beginning of trading this week. The price of gold XAU/USD settled around the level of 1936 dollars per ounce at the time of writing the analysis.

There may be an element of gold that engages in the broader commodity rally fueled by China, or perhaps sovereign purchases by global central banks continue to support demand.

However, there is still a lot of work to be done before the technical picture becomes positive again. The price of gold suffered a 7.9% decline over the 3.5 months from early May to mid-August, fueling widespread pessimism. But that came after a strong rise that pushed the price of the yellow metal up 26.3% in the previous 7.2 months. Its top of $2050 was within striking distance of a new all-time nominal high!

Retracements are considered normal and healthy in the ups and downs of the rising market, which works to rebalance morale to prolong their lives. Bulls take two steps forward before taking one step back, with the last step necessary to eliminate excessive herd greed near temporary highs. This latest rally for gold survived a previous 7.2% decline in February, then quickly rose 13.2% to new record highs. Pullbacks provide medium height buying opportunities.

After exiting July at $1,966, the gold market was well positioned to rally again in August. Usually last month is when gold’s traditional fall rally gains momentum. During the recent gold boom years, August enjoyed the third best monthly gains at 1.7% on average! But this definitely did not happen this time, the month of August deviated greatly from its seasonal text. Gold fell due to the extraordinary selling pressure.

• The continuation of the strength of the US dollar weakens the opportunity for the gold price XAU/USD relatively to rebound upwards.
• The gold market receives a positive boost from other factors represented by the global geopolitical tensions.
• The fears of the global economic recession originating in China this time and renewed fears of the outbreak of covid19 mutations again.
• According to the performance on today’s chart below, the price of gold XAU/USD is still in an upward channel and needs to rebound upwards towards the resistance levels 1950 and 1975 dollars respectively so that the bulls control the trend.

I still prefer to buy gold from each bearish level and the closest support levels are currently $1925 and $1910 respectively.

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