The gold rate retraced slightly during the past trades, but reversed and climbed to the 200-day moving average. The $ 1,800 level is sort of a magnet for the price, so gold is now just trying to figure out where to go in the longer term. If it breaks past the highs of last week, it will start towards the $ 1,860 mark, which many traders will be looking at as it will fill the gap that occurred a couple of weeks ago.
Now it is necessary to monitor the US dollar index, because if it starts to strengthen sharply, it will almost certainly work against the gold metal.
The main support level for gold is the $ 1.750 level. If the asset breaks it down, it could be the start of a major move towards the $ 1.680 line. After that, the gold rate may go to the value of $ 1.500 or even lower.
According to Christopher Lewis, this market will continue to remain hostage to the American currency, but this is quite typical.
According to Gary Wagner, continued pressure from the extremely strong US stock market, coupled with the strengthening dollar, has limited any continuation of the momentum generated by the latest rally.
Gold hit an intraday low of $ 1,750 on June 29 and then traded higher for the next five trading days in a row. This resulted in gold futures breaking the 100-day moving average, which is currently at $ 1,789.80, before forming a base and moving sideways just above $ 1,800.
At the time of writing, the most active contract on the Comex is down four dollars to $ 1.806. About half of this decline is due to the strengthening of the dollar. However, it was the strong stock market that triggered the flow of investment capital from a safe asset to a risky asset class.
Reuters reported that the European Central Bank will chart a new policy course at its next meeting that will reflect the change in strategy and show how serious the central bank is about the inflation recovery.
Last week, the ECB announced a new strategy, similar to that of the Federal Reserve, which allows inflation to exceed the 2% inflation target in an environment where interest rates are close to zero, as it is now.
Fed Chairman Jerome Powell s challenge this week will be to convince Congress to maintain the current loose monetary policy in light of the fact that US stocks continue to rise and GDP strengthens. Given the highest inflationary pressures in eight years and soaring house prices, this can be very difficult.
The fact that the ECB and the Federal Reserve continue to push for an adaptive stance may be the main incentive needed to push gold upward.