Gold market analysis

"Gold Market Bulls Take the Lead for Now" 17/7 09:47 am Finalized 

Yesterday, the gold price's reaction to the US June PPI data was not as strong as its response to the CPI. The year-on-year increase in both the overall and core PPI in June was significantly smaller than that in May. The overall PPI rose from 2.7% to 2.3%, and the core PPI from 3.2% to 2.6%. On a monthly basis, there was no change. Why did the CPI increase in June, but the PPI decrease? The Bureau of Labor Statistics pointed out that the main reason is the difference in sampling. The PPI includes all products sold by domestic producers to households, but the CPI includes goods and services provided by businesses and the government to consumers. For example, rent, which accounts for the largest proportion in the CPI, is not included in the PPI. Additionally, the CPI includes imports, but the PPI does not. The CPI only includes personal consumer goods directly paid for by consumers, while the PPI includes consumer goods that consumers may not have paid for. 

Trump wants to force Powell to resign. 

Although the gold price did not react much at the beginning of the release of the PPI data, it still followed the expected pattern of falling first and then rising. The reason for this might be related to the fact that US President Trump is considering removing Federal Reserve Chair Jerome Powell from his position. According to CBS, several people directly familiar with the matter revealed that when Trump asked some Republican congressmen on Tuesday whether he should fire Powell, all of them agreed. However, according to federal law, there must be a "reasonable cause" to remove the chairperson of the Federal Reserve, so it is questionable whether this can be done, and even if it is carried out, it is likely to face legal challenges. Trump has repeatedly publicly criticized Powell's monetary policy in this way. I think it is a provocation, aiming to make Powell realize the difficulty and step down voluntarily. This would be exactly what Trump wants. But if Powell ignores it, Trump will have no way out! 

Yesterday, the gold price gradually weakened to $3,319.78, very close to the first key support level of $3,319.50 mentioned yesterday. It then sharply rose to a high of $3,377 before falling back and rebounding. However, it was blocked again at the $3,357 level. In the early Asian session today, it stabilized above $3,340. Analyzing the gold price trend from different timeframes, the monthly chart shows an upward trend, but the 9RSI is still as high as 90. The weekly chart shows a bearish candlestick pattern, while the daily chart shows an upward trend, but the 20-day SMA is gradually moving down towards the 50-day SMA. The key level remains at $3,321, with $3,282.80 as the next important support level. Resistance levels are at $3,365.80 and $3,400. Therefore, the current major trading range is between $3,321 and $3,400. 

The short-term upward opportunity for gold prices is relatively large. 

From the hourly chart, $3,321 is a key support level for the day. Based on the Fibonacci extension of 100%, gold has the potential to fall to $3,311.54 before rebounding significantly. However, if it closes above the July 11 low of $3,321.27, the upward development pattern remains unchanged. Especially since yesterday, gold broke through $3,375 strongly but did not break through $3,320, indicating a stronger upward intention. Therefore, it is expected that gold will fluctuate between $3,321 and $3,360 on the day. 

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