GOLD & CRUDE OIL TALKING POINTS:

Gold prices shot higher as the US Dollar retreated from intraday highs on Tuesday amid hopes for a breakthrough in deadlocked Brexit negotiations, with a spirited GBP/USD advance seemingly echoing as broader weakness for global reserve currency.

The news did not extend to broader sentiment, keeping yields anchored. That allowed the yellow metal to capitalize on anti-fiat demand without the countervailing headwind of higher rates, which has accompanied recent risk-inspired bouts of USD weakness.

Crude oil likewise found support as the Greenback stumbled. Gains unraveled however as API data suggested that US inventories added 2 million barrels last week. By contrast, the markets expect official EIA figures to print a 3.2-million-barrel drawdown later today. A surprise in API’s favor may feed selling pressure.

Looking ahead, a quiet data docket may leave sentiment trends in focus. Bellwether S&P 500 stock index futures are pointing higher to flag a risk-on tilt. Gold may try to extend gains as the Dollar weakens but a true upswell in risk appetite will probably boost yields, limiting gains. Crude oil may gain ground.

GOLD TECHNICAL ANALYSIS
Gold prices overcome resistance at 1789.78, the 38.2% Fibonacci expansion. The 50% Fib at 1827.82 marks the next upside threshold, with a push above that eyeing the 61.8% level at 1864.86 next. Alternatively, a turn back through support 1747.74 may expose 1679.81 thereafter.

CRUDE OIL TECHNICAL ANALYSIS
Crude oil prices remain adrift below resistance in the 42.40-43.88 area. Negative RSI divergence hints at the possibility of topping, but confirmation is absent for now. A daily close below 34.78 may then expose the 27.40-29.11 area. Alternatively, a breach of resistance is likely to target the $50/bbl figure next.

GOLD PRICE – HESITANT BULLS
On Wednesday, Gold made an over seven and a half-year high at $1,789 then retreated after as some bulls seemed to cut back. On Friday, the price closed the weekly candlestick with a Doji pattern highlighting the market indecision at this point.

Last week, Gold rallied amid doubt of fast global recovery due to rapid rises in coronavirus cases in the US and elsewhere. Nonetheless, positive news about Coronavirus vaccine trials revived hopes of a V shape recovery, and the stronger than expected US job report kept investor’s spirits high.

On June 22, the price broke above the upper line of bullish rectangle marked on the chart eyeing a test of $1,824. Additionally, the price climbed to the current trading zone $1,752 -$1,796.

A close below the high end of the zone signals bull’s hesitation and may lead some of them to exit the market and press Gold to fall towards $1,685. A further close below that level could send the price even lower towards $1,635.
On the flip side, a close above the high end of the zone reflects a stronger bullish sentiment and this may cause a rally towards $1,859.

GOLD FOUR-HOUR PRICE CHART (JUNE 11 – JULY 6, 2020)
gold four hour price chart 06-07-20
On June 19, XAU/USD broke above the downtrend line originated from the June 11 high at $1,744, and resumed bullish price action. Currently, the price trades above the uptrend line originated from the June 26 low at $1,747 therefore, any violation of this line would generate a bearish signal.

To conclude, a break above the $1,803 handle could increase the likelihood of testing $1,824. On the other hand, any break below $1,744 could send Gold towards $1,721. That said, the weekly resistance and support levels underscored on the four-hour chart should be considered.

 

GOLD PRICE TALKING POINTS

The price of gold holds steady following the kneejerk reaction to the US Non-Farm Payrolls (NFP) report, but current market conditions may keep the precious metal afloat as bullion trades to a fresh yearly high ($1789) in July.

GOLD PRICE RETAINS BULLISH BEHAVIOR IN JULY TO MARK FRESH 2020 HIGH
The price of gold has traded to fresh yearly highs during every single month so far in 2020, and the bullish behavior may persist throughout July as the reversal from the May low ($1670) pushes the Relative Strength Index (RSI) towards overbought territory.

Looking ahead, the update to the US NFP report may influence the monetary policy outlook as the economy adds 4.8 million jobs in June versus forecasts for a 3.0 million print, and the ongoing improvement in the labor market is likely to keep the Federal Reserve on the sidelines as the update to the Summary of Economic Projections (SEP) show “a general expectation of an economic recovery beginning in the second half of this year.”

At the same time, the Federal Open Market Committee (FOMC) Minutes suggest the central bank will gradually alter the forward guidance for monetary policy as “various participants noted that the economy is likely to need support from highly accommodative monetary policy for some time and that it will be important in coming months for the Committee to provide greater clarity regarding the likely path of the federal funds rate and asset purchases.”

The FOMC Minutes revealed that “many participants remarked that, as long as the Committee’s forward guidance remained credible on its own, it was not clear that there would be a need for the Committee to reinforce its forward guidance with the adoption of a YCT (yield caps or targets) policy,” and it seems as though the central bank is in no rush to deploy more unconventional tools as “participants generally indicated support for outcome-based forward guidance.”

The statement suggests the FOMC will carry out a wait-and-see approach as the central bank vows to “to increase its holdings of Treasury securities and agency MBS (Mortgage-Backed Security) and agency CMBS (Commercial Mortgage-Backed Security) at least at the current pace,” and it seems as though Chairman Jerome Powell and Co. will rely on US lawmakers to further support the economy as Fed officials warn that “fiscal support for households, businesses, and state and local governments might prove to be insufficient.”

In turn, the FOMC may stick to the same script at the next interest rate decision on July 29 as the central bank remains “committed to using its full range of tools to support the U.S. economy in this challenging time,” and the recent contraction in the Federal Reserve’s balance sheet may prove to be short lived as the reduction is largely driven by a decline in liquidity swaps.

As a result, the low interest rate environment along with the ballooning central bank balance sheets may continue to act as a backstop for the price of gold as market participants look for an alternative to fiat-currencies.

The opening range for 2020 instilled a constructive outlook for the price of gold as the precious metal cleared the 2019 high ($1557), with the Relative Strength Index (RSI) pushing into overbought territory during the same period.

A similar scenario materialized in February, with the price of gold marking the monthly low ($1548) during the first full week, while the RSI broke out of the bearish formation from earlier this year to push back into overbought territory.

However, the monthly opening range for March as less relevant amid the pickup in volatility, with the decline from the monthly high ($1704) leading to a break of the January low ($1517).

Nevertheless, the reaction to the former-resistance zone around $1450 (38.2% retracement) to $1452 (100% expansion) instilled a constructive outlook for bullion especially as the RSI reversed course ahead of oversold territory and broke out of the bearish formation from February.

In turn, gold cleared the March high ($1704) to tag a new yearly high ($1748) in April, with the bullish behavior also taking shape in May as the precious metal traded to a fresh 2020 high ($1765).

The bullish behavior carried into June as the reversal from the May low ($1670) produced a break of the monthly opening range and pushed the price of bullion to a fresh 2020 high ($1786), with the trend also taking shape in July as the precious metal tags a fresh yearly high ($1789).

The move above the May high ($1765) brings the 2012 high ($1796) back on the radar, but need a break/close above the $1786 (38.2% expansion) region to open up the topside hurdles, with the next area of interest coming in around $1803, the November 2011 high, followed by the $1822 (50% expansion) region.

Will keep a close eye on the RSI as it appears to be stalling ahead of overbought territory, but a break above 70 is likely to be accompanied by higher gold prices as the bullish momentum gathers pace.

Anti-fiat gold prices spent the previous 24 hours in range-bound trade which was also seen in the US Dollar and in longer-dated Treasury yields. The latter two are key fundamental drivers for XAU/USD. Financial markets spent Monday recovering from the risk aversion tone left behind at the end of last week. The S&P 500 and Dow Jones closed +1.47% and +2.32% respectively.

The improvement in risk appetite supported growth-oriented crude oil prices as WTI experienced its best day in over 3 weeks (+3.8%). A combination of rosy US home sales and Boeing being given the greenlight to begin testing its troubled 737 MAX plane likely improved market mood. This is as US coronavirus cases only climbed 1.2% over the past 24 hours, lower than the previous week’s 1.6% average.

Crude oil prices may continue climbing as S&P 500 futures point higher following better-than-expected Chinese manufacturing PMI data. The latter may have supported global growth recovery bets, which could be underscored by upcoming Canadian GDP data. For gold prices, the near-term trajectory is more uncertain. Rising optimism in financial markets may boost government bond yields at the expense of USD.

GOLD TECHNICAL ANALYSIS

Gold prices have left behind a Doji candlestick on the daily chart. This is a sign of indecision which could precede a turn lower given a close lower ahead. That would place the focus on near term rising support from the beginning of June – red line. Otherwise, further gains may see the precious metal continue on its cautious journey towards the 2012 high at 1795.

CRUDE OIL TECHNICAL ANALYSIS

WTI crude oil prices remain under key resistance at 40.42 – 41.60. Immediately below, the 20-day simple moving average (SMA) sits as support. Resuming the uptrend entails pushing above the former, opening the door to testing 43.87, the January low. Otherwise, a descent through the 20-day SMA opens the door to testing 39.40. Taking out the latter exposes 37.10.

GOLD PRICE – CREEPS TOWARDS $1,800

On Wednesday, Gold took off to an over seven and a half-year high at $1,779 then retreated as some bulls seemed to cut back nonetheless, the weekly candlestick closed on Friday in the green with a 1.6% gain.

Caution over rapid rises in U.S. coronavirus cases cast doubt over the reopening of the economy and kept demand for the safe-havens intact. Therefore, investors continued to adjust between the economic stimulus measures with the uncertainty coming from the rising levels of coronavirus cases in the US and elsewhere.

Last month, the price paused its upward trend then traded in a continuation pattern (bullish rectangle). Last week, the price broke above the upper line of the rectangle located at $1,747, and rebounded twice from this level indicating that bulls had the upper hand.

Thus, Gold could be on its way towards the high end of the current trading zone $1,752 – $1,796. Any further close above this level means a stronger bullish sentiment and may extend the rally towards $1,859.

In turn, a close below $1,747 would invalidate the bullish rectangle pattern and reflect a weaker bullish sentiment. That could send the price towards $1,685 and any further close below this level could press XAU/USD even lower towards $1,635.

On Friday, XAU/USD rebounded from the uptrend line originated from the June 15 low at $1,704 indicating that bullish bias was still in place. Today, the price reversed lower eyeing a test of the aforementioned uptrend line.

Hence, any violation of this line increases the likelihood of creating a reversal pattern (double top). A further break below the neckline of the double top pattern located at $1,747 would be considered a bearish signal.

To conclude, a break above the $1,780 handle would negate the double top pattern and may resume bullish price action towards the high end of the trading zone discussed above on the daily chart. On the other hand, any break below $1,744 could send Gold towards $1,721. Nonetheless, the weekly resistance and support levels marked on the four-hour chart should be watched be kept in focus.

GOLD PRICE TALKING POINTS
The price of gold approaches the yearly high ($1765) as the Federal Reserve’s balance sheet contracts for the first time since the outbreak of COVID-19, and current market conditions may keep the precious metal afloat as the reversal from the May low ($1670) appears to be gathering pace.

GOLD PRICE APPROACHES 2020 HIGH AS FED BALANCE SHEET CONTRACTS
Goldtrades to a fresh monthly high ($1759) as the update to the Fed’s balance sheet shows total assets narrowing to $7.09 trillion from $7.17 trillion on June 8, and the price for bullion may extend the bullish behavior from earlier this year as it carves a fresh series of higher highs and lows.

Gold has traded to fresh yearly highs during every single month so far in 2020, and the trend may persist despite the limited reaction to the Federal Reserve testimony as Chairman Jerome Powell vows to “increase our holdings of Treasury securities and agency mortgage-backed securities over coming months at least at the current pace.”

In turn, the contraction in the Fed’s balance sheet is likely to be short lived as the Federal Open Market Committee (FOMC) announces that the Secondary Market Corporate Credit Facility (SMCCF) “will purchase corporate bonds to create a corporate bond portfolio that is based on a broad, diversified market index of U.S. corporate bonds,” but it seems as though there’s little interest to implement more non-standard measures as the update to the Summary of Economic Projections (SEP) show “a general expectation of an economic recovery beginning in the second half of this year.”

Recent remarks from Fed officials suggest the central bank will carry out a wait-and-see over the coming months as Chairman Powell and Co. pledge to “evaluate our monetary policy stance and communications as more information about the trajectory of the economy becomes available,” and the FOMC may scale back the dovish forward guidance at the next interest rate decision on July 29 as Vice Chair Richard Clarida emphasizes that the committee “will wind down these lending facilities at such time as we determine the circumstances we confront are no longer unusual or exigent,”

With that said, the FOMC appears to be moving to the sidelines afterexpanding the scope of the Main Street Lending Program “to allow more small and medium-sized businesses to be able to receive support,” but the low interest rate environment along with the ballooning central bank balance sheets may continue to act as a backstop for the price of goldas marketparticipants look for an alternative to fiat-currencies.

The opening range for 2020 instilled a constructive outlook for the price of gold as the precious metal cleared the 2019 high ($1557), with the Relative Strength Index (RSI) pushing into overbought territory during the same period.
A similar scenario materialized in February, with the price of gold marking the monthly low ($1548) during the first full week, while the RSI broke out of the bearish formation from earlier this year to push back into overbought territory.
However, the monthly opening range for March as less relevant amid the pickup in volatility, with the decline from the monthly high ($1704) leading to a break of the January low ($1517).
Nevertheless, the reaction to the former-resistance zone around $1450 (38.2% retracement) to $1452 (100% expansion) instilled a constructive outlook for bullion especially as the RSI reversed course ahead of oversold territory and broke out of the bearish formation from February.
In turn, gold cleared the March high ($1704) to tag a new yearly high ($1748) in April, with the bullish behavior also taking shape in May as the precious metal traded to a fresh 2020 high ($1765).
The bullish behavior may persist in June as the reversal from the May low ($1670) produces a break of the monthly opening range, with the RSI highlighting a similar dynamic as the indicator clearsthe negative slope from the previous month.
Need a close above $1754 (261.8% expansion) to open up the $1786 (38.2% expansion) region, with the 2012 high ($1796) next on the radar.

Gold prices have been moving rather slowly thus far this week.
Last week brought a quick rush of momentum in Gold after the FOMC rate decision, but this soon stalled when prices tested a key point of resistance.

GOLD PRICES REMAIN IN RANGE, FOR NOW
Gold prices have now been battling a key point of resistance for two months. This comes fresh on the heels of a 20% pop as the yellow metal surged following a support test at a very important area on the chart. That same area had helped to hold the lows in Q4 of last year and quickly came back into play in mid-March as Gold prices were spiraling-lower as the world prepared for fallout from shutdowns related to the coronavirus.

This fright brought a near -15% sell-off to Gold prices, until that support could come into play, at least; after which buyers came in and helped to push price action back-up to fresh seven-year highs just a few weeks later. Since then, however, little trend has shown as Gold prices have ranged back-and-forth between a couple of longer-term Fibonacci levels.

Price action in Gold has been particularly slow over the past few trading days. There was a bit of momentum that showed in the aftermath of the FOMC rate decision. But, as looked at on Thursday, that merely pushed prices up to the same Fibonacci level that had functioned as resistance earlier in June, after which the topside push stalled and prices reverted back into a range-like backdrop.

Gold price levels appear to be of particular import given this now two months of range. The resistance side is showing around the 1742.50 Fibonacci level, which is the 14.4% marker of the post-Financial Collapse move in Gold. There was one instance of prices testing above this key point on the chart over the past two months, and that was when Gold traders got excited by the comment from FOMC Chair, Jerome Powell, when he said that there was ‘no limit’ to what the Fed could do with the liquidity programs available to them. Gold prices quickly perched up to a fresh high but, soon fell back below this key point on the chart and continued to find resistance at this level afterwards.

The support side of that recent range is showing around another 14.4% Fibonacci retracement, but this one is derived from the longer-term major move spanning from the 2009 low up to the 2011 high.

COVID-19 remains prime factor to economic recovery
The Benchmark Federal Funds Rate unchanged at 0%-0.25%
Dot plot shows rates likely to remain low until 2022
The Federal Open Market Committee of the Federal Reserve left interest rates unchanged Wednesday afternoon, in line with expectations. This latest action leaves the benchmark Federal Funds rate at its historic low of 0%-0.25%. Gold marched higher following the announcement. Granted that, the Dow Jones Index and S&P 500 Index failed to follow through on strength and quickly erased gains as Powell took the podium following the rate decision release. However, tech stocks continued to show strength and added to recent

Wednesday’s hold on rates follows unprecedented action from the Federal Reserve over the past few months amid the COVID-19 pandemic, as the Fed pulled rates down from the 1.75% to the current 0.25% upper limit to support the economy. Treasury yields dropped after a brief tick up on the FOMC news, and now continue to head lower following the conclusion of Chair Powell’s remarks. The 10-Year note’s yield fell to 0.75%, clawing back all gains from the past week.

Turning to the Fed’s updated economic projections, reveals GDP expectations from the Fed for the current year at -6.5% which is slightly more optimistic compared to recent figures from the OECD, showing a -7.3% to -8.5% drop in U.S. GDP. Nevertheless, projections for 2021 show the Fed expects a rebound in GDP with a positive 5.0% figure. This follows The National Bureau of Economic Research announcing Monday that the U.S. officially entered a recession in February, putting an end to the record economic expansion that followed the 2008 financial crisis.

During the press conference Chair Powell noted the challenges presented by the COVID-19 pandemic and stated that policy decisions will remain flexible in response to the ever changing situation. Rates remaining depressed through 2022 was highlighted when asked about the outlook on monetary policy, as Chair Powell referenced the dot plot and again hit on the unknown trajectory of the economy amid the virus pandemic.

While further policy tools, such as yield curve control (the Fed buying certain maturity Treasuries to keep targeted rates suppressed) were not discussed in the policy statement, many market participants expect the Fed to move this into their toolbox in the coming months. Willingness from the Fed to keep the taps open on its current tools, such as the balance sheet and current funding facilities bolstered gold, as the US Dollar weakened versus its major G10 peers.

GOLD PRICE ANALYSIS
Gold prices are starting the week with strength after interacting with a key support zone last week.
Last week saw Gold prices lose as much as -4.4% from the high to the low.
Gold prices remain in overbought territory via RSI on the monthly chart, but are bulls willing to wait or is that theme of strength nearing a return?
GOLD PRICES FALL INTO KEY SUPPORT THROUGH NFP
We’re not even through half of the year yet and it’s already been one for the record books, in a variety of ways. After an unprecedented level of market volatility in March and into April, Gold prices have shown a general tendency to range over the past month as markets gear up for whatever is next.

While the initial carnage was very visible in global equities, that aggressive turn-around which helped to drive the Nasdaq 100 to an even-higher all-time-high illustrates just how strong the buy the dip move has been. This, of course, was helped along by some considerable support from global governments, key of which was the US, as multiple stimulus programs were enacted in the effort of off-setting the economic destruction from the novel coronavirus. This brings up the prospect of USD weakness, particularly as the potential for continued government support remains.

That hope took a bit of a hit last week on the blowout NFP number that caught so many by surprise. While most economists were looking for yet another month of bad data, job losses and rising unemployment the actual print came out in a very different way – showing the most jobs added in a month – ever. That gave a quick shot of strength to US equities helping to drive the Nasdaq to that fresh high; and Gold prices suffered as sellers took-control and broke prices down to a fresh monthly low, with a support assist showing at the same price that held the lows in late-April.

Taking a step back to provide some context, and Gold prices are trading around a very interesting zone of support. I had looked at this support a couple of weeks ago as a very overbought Gold market continued to march-higher, and as looked at last week, that bullish charge continued into deep overbought conditions on long-term charts, eventually running into a Fibonacci level around the $1742.50 market on the chart.

GOLD PRICE STRATEGY: DEEPER CORRECTION OR RETURN OF THE BULLS?
As looked at last week, Gold prices moved to their most overbought level since 2011, when Gold prices topped out and then began a sell-off that lasted for a couple of years after. And outside of that – there were but two other instances of RSI getting that overbought on the monthly chart. With such a small sample size, it can be difficult to build accurate inferences: So an overbought reading of that level isn’t necessarily a motivator to sell as much as it is a point of caution from chasing the move higher.

And since prices topped-out at that Fibonacci level last week, Gold prices have lost as much as -4.4% from last week’s high down to last week’s low.

But with that support zone coming into play and bulls making a visible show in the early-portion of this week, the big question is whether the topside trend is ready to continue. From the hourly chart below, there may be some possible scope of continuation given the higher-highs and higher-lows that have begun to form; placing emphasis on a re-claim of the 1700 level which would establish yet another higher-high. Also of interest, there’s a trendline that’s starting to come into play, taken from the lower-highs last week with inflections on Tuesday and Thursday.

The price of gold struggles to retain the advance from earlier this week ahead of the US Non-Farm Payrolls (NFP) report, but the precious metal may stage another attempt to test the 2012 high ($1796) as the Relative Strength Index (RSI) breaks out of a negative slope.

GOLD PRICE LEVELS TO WATCH AHEAD OF US NON-FARM PAYROLLS (NFP) REPORT
The price of gold has traded to fresh yearly highs during every single month so far in 2020, and the precious metal may continue to exhibit a bullish behavior in June as the pullback from the yearly high ($1765) reverses ahead of the May low ($1670).

Image of DailyFX economic calendar for the US
Nevertheless, the fresh update to the US NFP report may shake up the near-term outlook for bullion as employment is expected to decline 4.25M in May following the 20.5M contraction the month prior, and it remains to be seen if the data will influence the monetary policy outlook as the Federal Reserve prepares to have the Municipal Liquidity Facility along with the Main Street Lending Program up and running in June.

The new set of non-standard measures may ultimately push the Federal Open Market Committee (FOMC) to the sidelines as the balance sheet climbs above $7 trillion in May, and the central bank may carry out a wait-and-see approach over the coming months as ChairmanJerome Powelltames speculation for a negative interest rate policy (NIRP).

In turn, the FOMC may merely attempt to buy time at its next interest rate decision on June 10 as Fed officials express mixed views regarding the US economy, but the committee may continue to endorse a dovish forward guidance as the central bank remains committed in “using its full range of tools to support the U.S. economy in this challenging time.”

With that said, the low interest rate environment along with the ballooning central bank balance sheets may continue to act as a backstop for goldas marketparticipants look for an alternative to fiat-currencies, and the precious metal may stage another attempt to test the 2012 high ($1796) as the Relative Strength Index (RSI) breaks out of a bearish formation.

The opening range for 2020 instilled a constructive outlook for the price of gold as the precious metal cleared the 2019 high ($1557), with the Relative Strength Index (RSI) pushing into overbought territory during the same period.
A similar scenario materialized in February, with the price of gold marking the monthly low ($1548) during the first full week, while the RSI broke out of the bearish formation from earlier this year to push back into overbought territory.
However, the monthly opening range for March as less relevant amid the pickup in volatility, with the decline from the monthly high ($1704) leading to a break of the January low ($1517).
Nevertheless, the reaction to the former-resistance zone around $1450 (38.2% retracement) to $1452 (100% expansion) instilled a constructive outlook for bullion especially as the RSI reversed course ahead of oversold territory and broke out of the bearish formation from February.
In turn, gold cleared the March high ($1704) to tag a new yearly high ($1748) in April, with the bullish behavior also taking shape in May as the precious metal traded to a fresh 2020 high ($1765).
The bullish behavior may persist in June as the price of gold reverses ahead of the May low ($1670), with the RSI highlighting a similar dynamic as the indicator breaks out of the negative slope from the previous month.
Need a close above the Fibonacci overlap around $1733 (78.6% retracement) to $1743 (23.6% expansion) to open up the $1754 (261.8% expansion) region, with the next area of interest coming in around $1786 (38.2% expansion) followed by the 2012 high ($1796).