Loading ...Submitted by Gary S. Wagner on Tuesday, July 6, 2021 – 21:59.
Although in celebration of Independence Day in the United States we had a three day weekend, you would never know it from the recent moves in gold. Gold basis the most active futures contract traded to a high of $1815 before settling just below $1800 per troy ounce. As we have begun to trade in Australia market forces have taken gold above $1800 per ounce, and if we see an effective close at or above $1800 an ounce that would signal the potential for higher pricing in gold.
The key is that during summer months we have muted volume as many traders are absent from there trading desks enjoying a summer holiday. That being said, it becomes much easier to move prices higher or lower when volume is muted.
One interesting facet is that recent gains come in light of a weaker than expected momentum in the US service sector. This data is according to the Institute for supply management or ISM. As reported by Niels Christiansen of Kitco News, “Tuesday the ISM said its nonmanufacturing index showed a reading of 60.1% for June, down from May’s reading of 64.0%. The data was weaker than expected, as consensus forecasts were calling for a 63.4% reading. Economists note that this is the lowest reading since February. However, the report noted that June’s decline comes after hitting a record high the previous month. The gold market is holding near session highs above $1,800 an ounce but is seeing little reaction to the latest economic data. August gold futures last traded at $1,811.7 an ounce, up 1.59% on the day.”
Although when this piece was written gold was above $1800 but closed in New York at $1795. As of 9:50 PM EST gold futures are currently trading up $6.20 and fixed at $1800.40 an ounce.
On a technical basis a close above $1800 would be significant, however, there are other technical indicators which are alluding to the potential for higher pricing. As yields have gone down in the 10-year US treasury note it is taken the precious yellow metal to highs not seen for the last three weeks. We have spoken about the fact that the 50-day moving average has been coming closer and closer to the 200-day moving average. However, with the recent decline in pricing it was possible that the 200-day MA could even possibly cross below the 50-day MA which would form a chart pattern simply called a death cross. In fact, the exact opposite it has occurred with the 50-day moving average crossing above the longer-term 200-day.
The fact that gold is now back above $1800 and it seems as though a golden cross is formed between the short-term and long-term moving averages certainly bodes well for the bullish faction in gold. Bloomberg news today reported that one in five global central banks intend to increase their gold reserves over the next year in a report in which cited a survey conducted by the world Gold Council and publicize month.
MarketWatch was told by Edward Moya, senior market analyst at Oanda, ““I think we’re seeing gold benefit from a plunge in bond yields He said that investors, however, may be reassessing their bullish outlook for bullion against a backdrop of Fed that might propel the dollar and yields ultimately higher.”
Although volume is then and we are in summer month trading we are witnessing the necessary steps for gold to once again return to a bullish demeanor and gain pricing over the next month.
Wishing you, as always, good trading and good health,