On Tuesday, July 29th, we noted that while the suspension of military strikes between the US and Iran dragged oil prices lower, easing global inflation pressures, the US dollar remains strong, supported by actual high interest rates and hitting a one-month high. This continues to suppress gold prices. Therefore, our operational advice suggested focusing on resistance levels at $4040, followed by $4070, and support levels at $4000, then $3960.
Looking at subsequent price action, during the US trading session on Tuesday, gold saw a minor rebound, rising to $4038 before encountering resistance. It then fell back in a volatile manner, extending the downtrend from the Asian and European sessions. The price touched a new daily low of $4011, before stabilizing and rebounding to $4047, where it again met resistance. Under renewed selling pressure, it dropped back to $4013. Currently, gold is trading around $4017, showing a weak short-term trend. Overall, gold's upside potential was limited, and it continued to face downward pressure after hitting resistance, which aligns with our expected direction.
Analysts at Wolfinance believe that gold's sharp rally last week reversed and declined, with the downtrend extending into the beginning of this week. This is mainly due to market expectations that the Federal Reserve will maintain high interest rates, which supports a strong US dollar and diminishes the appeal of holding non-yielding assets like gold.
Specifically, the suspension of military strikes between the US and Iran has eased tensions in the Middle East. The market has reassessed the risk of a disruption to the Strait of Hormuz, causing oil prices to fall from one-month highs and hit a one-week low. This has lowered long-term inflation expectations, putting pressure on gold. Furthermore, market bets on a Federal Reserve rate hike remain high. Although oil prices have fallen, the US dollar remains strong, limiting gold's rebound potential.
On the daily chart, gold's rally last week met resistance and reversed, with the downtrend continuing this week. The short-term trend is weak and bearish. For gold's support below, we can continue to watch the $4000 round number level, followed by the monthly low near $3960, which also aligns with the lower Bollinger Band on the daily chart. For resistance above, focus on the area around the 5-day and 10-day moving averages at $4045, which was near Tuesday's US session rebound high, followed by the middle Bollinger Band on the daily chart at $4072. The 5-day moving average is approaching a bearish cross, the MACD indicator shows a slight bearish turn from a bullish cross, and the KDJ and RSI indicators have formed bearish crosses. This short-term technical picture suggests a further downside risk for gold.
Gold intraday reference: Market expectations of a Federal Reserve rate hike support a strong US dollar, which continues to cap gold prices. The operational approach should be to treat the market with a range-bound mindset. Focus on resistance levels at $4045 and $4072, and support levels at $4000 and $3960.