Gold Price Forecast: "Overcooked Near Term Technical Indicators Begin to Cool"

Gold price analysis

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The gold price is quoted at $1977 an ounce on Tuesday. Analyst and technical forecaster Richard Perry of Hantec Markets looks at the market to gauge whether we are seeing a consolidation one the start of a more serious unwind in the precious metal.

A consolidation on gold has developed over the past week. Although the market poked to a new all-time high of $1984 yesterday, the impetus has ebbed away from the rally.

This has now broken the support of a two week uptrend and daily momentum indicators have begun to tail off.

As overcooked near term technical indicators begin to cool, the question becomes whether this will just be a minor consolidation before the next move higher or the beginning of an unwind.

Gold price analysis

There is little on the daily signals for the bulls to be overly worried about yet, however the more considered uptrend of the past eight weeks comes in way back around $1844 today, so there is still a threat of an unwinding move if the bulls get tired and a little twitchy.

The hourly chart shows more of a consolidation has developed as indicators (hourly RSI and MACD) now develop ranging configurations.

Initial support to watch is at $1960 as a decisive breach would imply a test of the more considerable support at $1940.

We would then be looking at the configuration of momentum indicators, whether the move would be a drift or more considerable selling pressure developing. Resistance in this consolidation is $1984 which is preventing a look at the big round number $2000 level.

Risk appetite got a welcome boost yesterday and this has filtered into today’s session.

The stronger than expected US ISM Manufacturing data for July helped to improve sentiment across the risk spectrum yesterday, buoyed by the better than expected new orders component.

This allowed a better breadth of rally on Wall Street, pulling a rally on the oil price and pulling trades away from safe havens such as the yen and the dollar.

The move has also enabled a mild “bear steepening” of the US yield curve (longer dated yields rising faster than shorter dated yields, something which tends to be linked with more positive risk environment).

The question is whether this momentum can be built upon now. Progress is being made in the talks in Congress over how to replace the emergency employment support in the US.

However, there is nothing concrete yet. Also, amidst the positivity in the ISM data, the employment component deteriorated and will add caution for the Non-farm Payrolls data later in the week. Taking a step back, it seems that these moves are generating a consolidation.

The huge dollar selling pressure of recent weeks may have abated, but it is not reversing.

It is still likely that agreement in Congress would be a key driver of the next decisive move.