Gold market analysis

"Gold Prices Expected to Enter a Short-Term Correction Phase" 23/7 10:02 am Completed 

Gold prices soared at the opening of the New York market yesterday, breaking through the Asian market high of $3,402 for spot gold. The upward trend continued and reached a high of around $3,430 before the London market closed. The reason for this is related to whether Powell can remain as the chair of the Federal Reserve until May next year. US Treasury Secretary Mnuchin and President Trump are in cahoots. Although the former said there is no sign that Powell should resign now, it would be acceptable if he wanted to leave early; the latter "predicted" that Powell would soon leave and that the federal funds rate should be reduced to 1%. 

The remarks of both sides once again served as an excuse for the market to sell off the US dollar. Although the gold price closed below $3,386 on the hourly chart in the midday Tokyo session yesterday, showing a short-term bearish signal, it only dropped to $3,383 at the opening of the European market and then returned to a low-volatility sideways pattern. Its strength really surprised me. 

This morning, the gold price further rose to a high of $3,439. As the gold price is getting closer to the June 16th high of $3,451, it should be expected to challenge that level. However, the gold price is likely to form a short-term top today. From the hourly chart, after reaching a high of $3,439 this morning, the gold price formed a shooting star pattern, indicating resistance at $3,440. Subsequently, it showed a high open and low close pattern with a broken foot, and fell back to the $3,422 level. As the bearish signal has emerged, the possibility of a top and a pullback today has increased significantly. 

3374.5 has strong material support. 

Measured by Fibonacci extension levels, the high this morning was just $1 away from the 1.382 level at $3,440.3, indicating that the target has been reached. Assuming that gold is about to enter a short-term correction, a 50% retracement of the largest increase since July 17 would bring the price down to $3,374.54, close to the July 14 high of $3,375.02, which can be regarded as an important support level for this correction. If a large range of bearish engulfing pattern appears on the hourly chart during the period when gold attempts to break through $3,451 again, the possibility of a short-term double top formation and subsequent decline will increase. 

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