Gold ended the week down $8.90 at $1269.05 an ounce, posting a second consecutive weekly loss. The wider environment remains relatively unfriendly for gold, with the U.S. Federal Reserve still likely to raise interest rates two more times this year. “Today, with the economy strong and risks to the outlook balanced, the case for continued gradual increases in the federal-funds rate remains strong and broadly supported among (participants on the committee),” Fed Chairman Jerome Powell said last week in a speech in Portugal. The Trump administration’s threat of tariffs could ignite a global trade war – gold historically has always been the safe, tangible commodity in times of uncertainty, but recently, it has been acting like a raw commodity instead of a safe-haven. The latest data from the Commodity Futures Trading Commission (CFTC) showed that speculative traders on the Chicago Mercantile Exchange reduced their net-long positions in gold to 96512 contracts, from 120240 a week earlier.
Trading below the daily Ichimoku cloud, along with the positively aligned Tenkan-sen (nine-period moving average, red line) and Kijun-sen (twenty six-period moving average, green line), suggests that the bears still have the near-term technical advantage. The daily Chikou-span (closing price plotted 26 periods behind, brown line) is also below prices. However, note that the strategic support in the 1261/0 area held last week, and the market is slightly oversold. If prices can stay above this area, a corrective upside bounce wouldn’t be surprising. The initial resistance sits in 1270-1272.56 (the Kijun-sen on the H4 chart), followed by 1277. The bulls will have to break through that barrier to gain momentum for 1283/2. Closing above 1283 on a daily basis indicates that XAU/USD is getting ready to test 1292.50-1289.
To the downside, keep an eye on the support in the 1266/5 area. If this support gives gave, the bears will have another chance to challenge 1261/0. A sustained break below 1260 opens up the risk of a drop to 1252/0. The bears have to produce a daily close below 1250 to march towards 1240/36. On its way down, support can be found in 1246/4.
