Looking back at the release of the minutes of the July interest rate meeting in Federal Reserve, most policymakers believe that there is a significant increase in US inflation or the need to continue raising interest rates to more effectively control inflation. These remarks made the market expect the Fed to maintain a relatively tough monetary policy stance for a longer period of time, further pushing up U.S. bond yields. The 10-year U.S. bond yield once rose to 4.32%, a five-month high. At the same time, the trend of the US dollar also continued to be strong, and the two together weighed heavily on the price of gold, causing the price of gold to fall below the warning level of USD1,890 last Monday. 

The 10-year U.S. bond yield once rose to 4.32%, a five-month high. At the same time, the trend of the US dollar also continued to be strong, and the two together weighed heavily on the price of gold, causing the price of gold to fall below the warning level of USD1,890 last Monday. On the weekly chart, gold fell for the fourth consecutive week and continued to hover below the USD1,900 mark. Although gold is facing downward pressure, the oversold situation is also quite obvious. Therefore, if the gold price finds support and rebounds around 1,850 - 1,860, it is expected that there will be opportunities for further gains. At that time, gold may appear to sell expectations and buy facts after the interest rate meeting in September is released or other economic data support. 

For now, gold as a whole is still biased towards weakness; because the trend is still a top-low structure with one top lower than one top and one bottom lower than one bottom, there is no obvious rebound force. USD1,880 is a temporary support level. If it fails, it will fall to USD1,860. This position happens to be the 50% retracement of the upward trend starting in November 2022. A daily close below the latter could open the door for a further decline towards the USD1,800 mark. On the contrary, if the gold price rises above the psychological mark of USD1,900, that is, the 38.2% retracement level. It starts to build a support platform near this position at the same time, it will be able to pave the way for the subsequent rise. In this case, the price of gold will be expected to rise to USD1,925. 

On the daily chart, it can be clearly seen that since the rise in March, the area of ​​1,860-1,880 has not been recovered by the callback. Thus, I personally prefer to hope that gold will fall back to 1,860 first as a rebound and then give it an upward momentum. It is likely to happen in September; it is expected to rebound around 1,860 after falling below 1,880. At that time, it may be promoted in conjunction with important news such as non-agricultural data or the central bank’s interest rate discussion. Then investors who are bullish on gold can pay attention to the buying deployment at 1,860 to capture the reversal. At the same time, we need to be cautious about the risks below, and wait for a clearer reversal pattern before entering the market.

Hugo Leong

Gold Analyst of Hantec Group