The precious metal closed almost unchanged at $1,571 per ounce last week, finishing down 0.32%.
At the same time, the dollar was busy rallying sharply against the euro. It also posted moderate gains against the rest of the majors (apart from the yen).
Fundamentally, the gold market is currently subject to two major factors:
- The possibility of QE3
- The financial drama in the Eurozone
On the Eurozone front, there is a lack of game changing measures. This can be seen through the high Italian and Spanish bond yields as well as the sell off on Friday of European shares.
Overall, this is likely to increase the demand for the most liquid asset. That would result in a rising US dollar which would in turn dampen demand for gold.
With the second quarter US GDP figure released on Friday, there is plenty of room for European concerns to hold back gold.
From a technical point of view, the picture looks rather negative with the bears holding the price action consistently below the downturn trend line since the beginning of March.
Gold Looking Bearish
On the daily chart, the MACD signal line is hovering just below zero and the RSI is holding around/just below the 50 level. This suggests that there could be more room for further downside movement and a test of the next major support level at $1,500.
In the alternative scenario, only a break out of the current range above $1,615, would trigger upside movement in the gold market, opening the door for a retest of the $1,666 resistance level.
Good luck and happy trading
Dafni Sedari, InterTrader
(Original article written 23 July 2012).
Spread betting and CFD trading carry a high level of risk to your capital and you may lose more than your initial investment. Spread betting and CFD trading may not be suitable for all investors. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved and seek independent financial advice where necessary.