Gold market analysis

"Gold Prices: Beware of a Dip Before a Rebound" 10:05 am, July 16th, Completed 

Yesterday, the US released its June overall CPI, which rose by 2.7% year-on-year after seasonal adjustment, higher than the 2.4% increase in May and the expected 2.6%. The core CPI, excluding food and energy, also rose by 2.9% year-on-year, slightly lower than the expected 3%. The US inflation rate has risen for two consecutive months, boosting the US dollar exchange rate. Major non-US currencies plunged sharply. The euro and the pound sterling against the US dollar both dropped nearly 100 points from their post-data highs before stabilizing. The US dollar against the Japanese yen rose more than 130 points from its post-data low and once broke through 149. Gold prices were naturally under pressure, with spot gold prices falling to the 3320 US dollar level before rebounding slightly, down 46 US dollars from the day's high of 3366 US dollars. 

However, gold prices tested $3,341 in the early Asian session yesterday but failed to break through. They then rose steadily and reached $3,365 in the Tokyo midday session. Even after the European markets opened, they remained consolidated at high levels and later rose as high as $3,366. Investors may be puzzled. With expectations that US inflation is likely to rise in June, the Federal Reserve is unlikely to cut interest rates this month, which should be unfavorable for gold prices. So why did gold prices still rise? 

Going with the flow is the way to survive. 

It should be known that the financial market gathers various types of speculators. Take the gold market as an example. There must be those who have made preparations for high inflation in advance, that is, they have bought the US dollar or sold gold before the data is released. This becomes the reason for the invisible hand to first kill the short positions of gold and then the long positions. The trigger of a large number of gold short positions to stop losses will become one of the driving forces to push up the gold price, reducing the profit cost of the major players. If the US CPI inflation rate in June unexpectedly drops, the market can also use the reason that the increase in the gold price has already reflected the relevant result to push the gold price down from the high level in the opposite direction. Investors should not argue about right and wrong or try to seek the truth in the financial market. Going with the trend is the way to survive! 

The upward trend of closing at 3321 remains unchanged. 

Although the gold price showed a single-day reversal pattern yesterday, as pointed out yesterday, as long as it closes above $3,321, the medium-term upward trend remains unchanged. Today is the third trading day after the gold price broke through upward. Currently, the gold price is closer to the support level. Tonight, the US will release the June PPI data, which is expected to reflect rising production costs. Be cautious of a further decline in the gold price. However, the current gold price is closer to an important bottom support. Unless the gold price is preparing for a major downward breakthrough, the rebound space for the gold price is relatively large. 

For the spot market, if the gold price closes above $3,332 on the hourly chart, it is expected to rebound further intraday, but it is likely to be blocked at the top of the large bearish candle at $3,351. Based on the Fibonacci expansion ratio of 1.382 and 1.618, the key intraday support levels for gold are at $3,319.5 and $3,311.5. If the gold price drops ahead of the PPI data release, be cautious of a significant rebound after the data release. 

The above content is for reference only and does not constitute investment advice. MTF Special Analyst Zheng Guangfu