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Gold retains a bullish feel with the price of the precious metal trading at $1780 an ounce at the time of writing on Tuesday. According to analyst and technical forecaster Richard Perry of Hantec Markets, weakness remains an opportunity to buy.
Another positive daily candle and decisive close higher has pulled the gold price to a new multi-year closing high and a test of the recent peak of $1789.
The market continues to run along the four week uptrend (very slightly redrawn to account for last week’s Nonfarm Payrolls spike low) which rises today to lend support at $1771.
Momentum indicators retain their positive configuration, with the RSI up into the mid-60s again, whilst Stochastics and MACD lines tick higher.
We continue to expect gold will edge to new multi-year highs, whilst there is still an implied target to be derived from the April to June consolidation range breakout.
A conservative target implies c. $1820 towards potentially $1830 in the coming weeks.
Given the propensity for gold to be cautiously breaking higher, we still look to use weakness as a chance to buy, with the trend at $1771 and the breakout support at $1764.
A little conviction would now be lost under $1757, but we would remain confident of our strategy whilst $1744 support remains intact. Above $1789 is a high dating back to the 2012 peak of $1795.
Market Rally Fades
It would appear that yesterday’s rally was drive just on the notion that China’s state run media encouraged its people to buy stocks to foster a "healthy bull run".
So perhaps it is of little surprise that a rally fuelled by hot air looks set for a retracement today.
China may have managed to pull further equity gains, but other Asian markets are more cautious, also futures elsewhere are turning back.
The focus in recent weeks has been far more on the concern that COVID-19 infection rates are rising alarmingly in the US and hampering the re-opening of the economy.
There are also pockets of lockdowns being reinstated across other countries such as Germany, Spain and Australia.
A bull rally seemingly priced for a perfect global economic recovery may need to prepare for disappointment. It is our view that disappointment could become a theme for Q3. The headline of the ISM Non-Manufacturing data, beating expectations at over 57 sounds great.
However, this only notes expansion versus the month of May, which could simply be negligible but broad based.
Also the employment component remains at 43 and in contraction. As many US states are hit by rising infection rates, July and through Q3 it could be a difficult period for a sustainable economic recovery.
Sentiment across major markets has a negative bias today. Yields are falling back, the dollar is looking to reclaim some ground lost from yesterday’s risk rally. Oil is lower and equities are lower as higher risk assets are hit.
The Aussie is also in the firing line today as the Reserve Bank of Australia held rates at +0.25% and did little to change its recent message of forward guidance (will not increase rates until there is progress towards employment and inflation goals).
With the city of Melbourne re-imposing a lockdown, this is hitting the Aussie today.