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Gold set to shine: Key levels to watch for a breakout

Gold set to shine Key levels to watch for a breakout
Aneena Alex

Gold has recently experienced a significant upward trend, driven by favorable economic factors and positive market sentiment. This trend suggests that gold is poised to test higher levels in the coming trading week, making it an important consideration for investors and traders.

In this context, RLinda, a professional trader, emphasized in a July 6 TradingView post that the positive fundamental background, along with technical indicators, points to continued growth for gold.

According to the analyst, Gold (XAU/USD) is currently supported by strong economic indicators and market expectations. A recent dip below the ascending trend line was temporary, indicating strong bullish sentiment among traders.

Gold price analysis chart. Source: TradingView / RLinda

The trading session closed on a positive note on July 5, suggesting continued growth potential. The current price is consolidating above the 50-day moving average (MA-50), which is a bullish signal. 

The price range between $2,390 and $2,431 is crucial, and breaking above $2,390 and holding this level could lead to a new all-time high (ATH).

Additionally, increasing trading volumes support this bullish momentum. Key levels to watch are resistance at $2,450.13 and support at $2,363.74. 

The current price action suggests a potential test of the $2,450 level if the bullish trend continues. As of the last trading session, gold is priced at $2,391.62, showing a weekly gain of 3%.

Key factors influencing Gold prices

Economic data and fed expectations boost Gold

The June non-farm payrolls report showed 206,000 new jobs, exceeding expectations. However, revisions to May and April figures and an increase in the unemployment rate to 4.1% suggest a cooling labor market. 

This data strengthens the case for potential Federal Reserve rate cuts. Market confidence in a September rate cut remains robust at approximately 72%, with an increased likelihood of a second rate cut by December. This anticipation supports higher gold prices.

Additionally, the U.S. Dollar Index (DXY) fell by 0.92% over the week, enhancing gold’s appeal to holders of other currencies. Yields on the benchmark 10-year Treasury note decreased, reducing the opportunity cost of holding non-yielding gold, further supporting its price.

Geopolitical tensions

Geopolitical conflicts and political shifts are reshaping the global economic landscape, potentially affecting the stability of free trade and financial markets.

Recent conflicts in the Middle East and Ukraine, political changes in Europe, and growing divides between Eastern and Western nations—highlighted by the expansion of the BRICS trading bloc—are contributing to these uncertainties. 

Gold, traditionally viewed as a safe haven during times of crisis, is gaining importance as a stable investment alternative to the US Dollar, especially in light of these developments. 

Moreover, challenges like China’s economic difficulties and ongoing geopolitical tensions are likely to support gold prices. As investors seek stability amidst global uncertainty, the demand for gold could increase, leading to higher prices and reinforcing its role in global finance.

Key economic events to watch

Key economic data and events in the coming week will likely influence gold prices significantly. Economists anticipate a 0.2% rise in headline CPI, with core CPI expected to remain unchanged.

A cooler-than-expected inflation reading could reinforce expectations for rate cuts. Fed Chairman Powell’s two-day Congressional testimony will be closely monitored for insights into the central bank’s stance on future rate decisions.

Traders will also be closely watching the GDP (UK), Core CPI (US), CPI (US), and PPI (US) reports.

The convergence of fundamental factors and technical indicators suggests that gold could test higher levels in the coming week, potentially reaching the $2,450 mark. 

With the market anticipating dovish signals from the Federal Reserve and key economic data supporting the case for rate cuts, gold’s bullish trend is expected to continue. 

Traders and investors should closely monitor upcoming economic events and adjust their strategies accordingly.

Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.

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