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Gold prices are located at $1769 / ounce at the time of writing at the start of the new week. Despite hitting a new multi-year high last week analyst and technical forecaster Richard Perry of Hantec Markets says bulls have been hit with some conflicting signals in the past few sessions.
Once more we see gold edging higher through resistance but without decisively making the breakout.
It is a similar move to the one we saw back in May, where the market moved through resistance to multi-year highs, only to struggle to sustain the traction.
This time, we have seen a breakout through $1764 which lends the positive bias, but it is tough going for the bulls, with some conflicting candlesticks in the past few sessions.
However, there is now a well defined uptrend that has developed in the past three weeks which is rising around $1751 today.
The support is developing around $1744/$1747 from old June highs, which would point to$1744/$1764 now being an area to look for long opportunities. One of the more significant improvements that has developed in the past week has been the return of a more positive momentum configuration, where Stochastics are consistently holding above 75, RSI holding above 60 and MACD lines rising for the first time since late April.
With the market almost flat today, we look to us near term weakness now as a chance to buy for moves towards $1795 (the 2012 high) and beyond. A close below $1744 would defer this strategy.
Risk aversion has taken more of a grip on major markets in recent sessions as a drip feed of negative newsflow surrounding second wave infection rates of COVID-19 has increased.
Infection rates rising again in Japan, Australia and Germany are a concern, but alarming increases in the infection rate curves across several US states have made traders sit up and take note. The risk recovery from the pandemic cannot be a one way bet. The emergence of the US from economic shutdown will need to be re-calculated as several states re-instate elements of lockdown procedure.
The weight of this on the risk recovery is growing. The decline of longer date Treasury yields (and curve flattening) is a signal for risk aversion and risk asset plays are increasingly struggling. Wall Street is faltering back towards testing key technical breakout support, whilst oil is also slipping as the prospects of demand recovery are scaled back. The interesting mover here is how the market views the US dollar.
Does the dollar begin to lose its safe haven status if the US is seen to be the major focus of a second wave? This morning we see the dollar pressured across major forex, whilst equities are struggling (a degree of catch up on Wall Street losses from Friday though).