Gold Market Update: XAU/USD braces for another stellar weeek

  • XAU/USD settled above critical resistance $1,740.
  • Fundamental factors imply further price increase.

Gold had a stellar Friday after a slow trading activity during the week. The yellow metal gained over 1.5% in a single day, while August Comex gold futures finished the trading week at $1,756.20 an ounce.  The price managed to break free from a tight range and had the best daily close since May 20.

XAU/USD: Technical picture

From the technical point of view the critical resistance is seen at $1,750 an ounce, which is a strong level for Gold bulls. A daily close above this barrier will improve the technical picture and allow for an extended rally towards $1,765, which is the highest level of the year.

The support is created by the broken channel resistance of $1,740. While a move amove this hurdle is regarded as a positive signal, analysits warn that we will still need to see if the move is sustained.  Whether gold can hold the gound above $1,740 is the key question for next week. If the barrier gives way, the sell-off may be extneded towards $1,720 (the middle line of the daily Bollinger Band) and $1,716 (daily SMA50).

XAU/USD daily chart

Fundamental factors

Gold market experts believe that Gold is posied for another strong week due to a combination of fundamental factors, including COVID-19 reinfection rates, growing geopolitical tensions and economic uncertainty. 

Afshin Nabavi, senior vice president at precious metals trader MKS SA, commented on Friday as cited by Kitco News:

The market looks stuck in a range, gold needs to get above the $1,740 level. If it does, we can have a good rally. Wouldn’t be surprised if we see higher end of the range [due to] economical tensions thanks to COVID aftermath and tensions between the U.S. and China … Eventually, we should be heading to $1,800 or even higher before the end of the year.

The Federal Reserve officials noted that the second wave of coronavirus pandemic would have a prolonged negative effect on economic rebound, while the EU leaders failed to agrre on a massive stimulus plan that had been discussed for weeks.Those developments increased anti-risk sentiments and increased the demand for safe-haven assets on Friday.

Posted in FX