Gold tests major hurdle after big rally
After last week’s big 5% rally, gold has arrived at a major inflection point around $1770 to $1880 area, where it may encounter some resistance as the dollar sell-off potentially pauses.
Gold bulls would certainly want to see some upside follow-through, but a bit of consolidation and pullback wouldn't be a bad thing as it will help to work off short-term "overbought" conditions on the momentum oscillators.
But in terms of medium-term direction, everything now hinges on the dollar. The greenback is not dead, I don’t think.
The one eyed is still the king in the land of the blind, so I won’t expect to see further significant weakness in the dollar. If the dollar does not see significant weakness from here, that should hold gold back, I would imagine.
Comments made by Federal Reserve Governor Christopher Waller at the weekend certainly calls for caution. Waller said “we’ve still got a ways to go” before pausing interest rates.
Waller said: “These rates are going to stay -- keep going up -- and they’re going to stay high for a while until we see this inflation get down closer to our target…We’ve still got a ways to go. This isn’t ending in the next meeting or two.”
Waller's hawkish comments has already impacted some currency pairs. The USD/JPY for example bounced about 200 pips off its lows from Friday.
If we see a short-term lower low beneath today's earlier low at $1753, then that could be a sign of weakness to come, which could potentially lead to some technical selling towards the support levels shown on this weekly chart.
By Fawad Razaqzada
Gold bulls would certainly want to see some upside follow-through, but a bit of consolidation and pullback wouldn't be a bad thing as it will help to work off short-term "overbought" conditions on the momentum oscillators.
But in terms of medium-term direction, everything now hinges on the dollar. The greenback is not dead, I don’t think.
The one eyed is still the king in the land of the blind, so I won’t expect to see further significant weakness in the dollar. If the dollar does not see significant weakness from here, that should hold gold back, I would imagine.
Comments made by Federal Reserve Governor Christopher Waller at the weekend certainly calls for caution. Waller said “we’ve still got a ways to go” before pausing interest rates.
Waller said: “These rates are going to stay -- keep going up -- and they’re going to stay high for a while until we see this inflation get down closer to our target…We’ve still got a ways to go. This isn’t ending in the next meeting or two.”
Waller's hawkish comments has already impacted some currency pairs. The USD/JPY for example bounced about 200 pips off its lows from Friday.
If we see a short-term lower low beneath today's earlier low at $1753, then that could be a sign of weakness to come, which could potentially lead to some technical selling towards the support levels shown on this weekly chart.
By Fawad Razaqzada
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