Today, strong dollar strength was the primary factor responsible for the small fall in gold prices.
United States Dollar Technical Analysis
The dollar’s trading range between the daily low and daily high has been 1.27 percent. Today, the dollar index began at 105.25 and fell to 104.92 inside the first four hours of trading. At 4:40 p.m. EDT, the dollar is trading slightly below its all-time high of 106.20, at 106.19 following today’s gain of 0.854 points or 0.81 percent.
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The dollar has been trading above its 50-day moving average since the third week of February, which is technical proof that the dollar is firmly entrenched in a short-term positive trend. During the past five months, the dollar has maintained above the 50-day moving average and on two occasions reaffirmed that support is located around the 50-day M.A.
During the week of May 30 to June 6, gold touched the 50-day moving average and rebounded upward from the 50-day moving average, confirming technical support. The second occurrence came during today’s trading, when the dollar index traded barely 0.016 points above the 50-day moving average.
Our research indicates dollar support begins at 104.516, the 23.6% Fibonacci retracement, and 104.904, the 50-day moving average. Significant support exists at 101.678, the 38.2% Fibonacci retracement, which corresponds to the bottom between May 30 and June 6. The initial level of resistance is around 107.26, while the dollar’s recent high of 109.105, which occurred on July 14, is the most significant level of resistance.
Gold Technical Analysis and Dollar Correlation
Gold futures are trading moderately down today, with the most active December Comex contract now set at $1776.20, a decrease of $11.50 or 0.46 percent from yesterday’s closing price. Given that the percentage decrease in gold is less than the percentage increase in the U.S. dollar, it is apparent that there is fractional purchasing, with currency strength exceeding any prospective profits.
Today, gold temporarily traded over $1800, reaching a high of $1805. However, these gains were temporary, as gold has since returned below $1800 and is now just $0.20 above its low of $1776. At $1795.20, the 50-day moving average for gold defines the initial level of resistance. The next level of resistance is around $1800, with significant resistance at $1831.30, the Fibonacci retracement level of 61.8%.
The dollar’s strength and gold’s weakness are closely related to today’s Federal Reserve member remarks. In an interview with CNBC, Mary Daly, president of the Federal Reserve Bank of San Francisco, stated that “the Fed’s struggle against inflation is far from over.” Additionally, she stated that the central bank will continue to hike interest rates as much as required to curb inflation.
Americans must be reassured that inflation is not a concern when they get up in the morning. Charles Evans, president of the Chicago Fed, maintained a less hawkish posture, stating that he anticipated the Fed would raise interest rates at a slower pace later in the year. However, this would depend on whether inflation starts to decline.” These words reflected a less dovish tone than those lately conveyed by Chairman Powell, leading to dollar strength and a decrease in gold prices today.