Gold futures rebounded from early session weakness on Friday to close higher for the session. The two-sided price action was generated as fears over business disruptions due to another record-breaking rise in COVID-19 cases at home drove up the possibility of additional fiscal and monetary stimulus.
Traders were also watching the price action in the U.S. Dollar Index, which was being influenced by the movement in the Euro as traders awaited the outcome of discussions at a European Union summit that market participants hope will advance a recovery fund that would help lift the EU out of recession.
On Friday, August Comex gold settled at $1810.00, up $9.70 or +0.54%.
Gold traders are also monitoring risk sentiment, following a divergence between NASDAQ Composite and the S&P 500 Index and Dow Jones Industrial Average. Falling U.S. Treasury yields are also helping to underpin gold prices.
Daily Swing Chart Technical Analysis
Main Swing Chart Technical Analysis
The main trend is up according to the daily swing chart. A trade through $1829.80 will signal a resumption of the uptrend. A move through $1766.30 changes the main trend to down.
Minor Swing Chart Technical Analysis
The minor trend is also up. A trade through $1819.50 will signal a resumption of the uptrend. The minor trend will change to down on a move through $1791.10. This will also shift momentum to the downside.
Retracement Level Analysis
The minor range is $1829.80 to $1791.10. Its 50% level at $1810.50 is currently acting like resistance. This pivot may be controlling the near-term direction of the market.
The short-term range is $1754.00 to $1829.80. Its 50% level at 1791.90 is support.
The main range is $1671.70 to $1829.80. If the main trend changes to down then look for a pullback into its 50% level at $1739.70.
Gold traders are reacting to the direction of Treasury yields, not the COVID-19 numbers. Lazy analysts and headline writers who won’t do the work are saying that safe-haven buying due to the surge in coronavirus cases is driving gold price higher. It’s just a bad assessment.
COVID-19 cases and gold aren’t directly linked.
Our work suggests that a sustained move over $1810.50 will indicate the presence of strong buyers. Meanwhile, taking out $1791.10 could trigger an acceleration to the downside with the next major target coming in at $1766.30.
Buying strength hasn’t been working out very well for gold traders. Just measure the gain from high to high since April. Most of the money has been made by buying the dip.
I don’t recommend chasing this market higher unless the Fed says rates are going negative. Fresh fiscal stimulus could also spike prices higher, but gold’s gains will be limited if stocks also spike higher.
The best strategy is to play for a pullback into a value area. Try to get some bang for your buck.