After a nosedive on Tuesday, prices for precious metals and, in particular, for gold rose slightly to the closing level of the previous week. Despite its traditional safe-haven status during economic or political uncertainty, gold remains under pressure due to the strengthening U.S. dollar.
During the last trading day on COMEX, August gold futures fell by 0.4%. Since Friday the pair XAU/USD is slightly strengthening against the growth in Asian equity markets. Thus, Shanghai Composite Index rose by 5.2%.
The price for gold is supported by the latest hope for a Greek deal after new proposals for economic reforms and budget cuts were submitted. This news strengthens the euro and locally weakens the U.S. dollar. However, in the medium term, the U.S. dollar would continue to strengthen and, thereafter, the prices for precious metals and gold would continue to decline.
Today we may see some volatility in the XAU/USD pair at 3:30 p.m. (GMT +3), when Canadian Labor Market statistics is released, and at 7:00 p.m., when Fed Chairman Janet Yellen delivers a speech on the outlook for the U.S. economy. Monday may open with a gap if on Sunday Greece and its creditors manage to reach agreement over a new bailout program.
Support and resistance
Since Tuesday, the pair has corrected from the year lows of 1147.00 to the local resistance level 1165.00 (EMA50 and the upper line of the descending channel on the 4-hour chart). Next strong resistance levels are 1178.00 (EMA200 on the 4-hour chart) and 1185.25 (23.6% Fibonacci). A breakout of these levels is possible, but unlikely, due to falling demand for gold among investors and the strengthening U.S. dollar.
Therefore, it is more reasonable to enter short positions when OsMA and Stochastic indicators give appropriate signals. From this position, consider levels 1165.00, 1169.30, 1172.00, 1174.50.
Alternative buy positions can be opened after the breakout of 1185.25 with the targets at 1198.00, 1207.50 (38.2% Fibonacci and EMA200 on the daily chart).
OsMA and Stochastic indicators on the daily chart give sell signals, on the 4-hour chart – buy signals.
Support levels: 1149.50, 1157.00.
Resistance Levels: 1165.00, 1169.30, 1172.00, 1174.50, 1178.00, 1185.25.
Today is the end of the week. Eurogroup Meetings and EU Economic Summit are held this weekend. Monday may open with a gap in any direction. Now it is very risky to enter the market, however, short positions may be considered from the current price and from levels 1165.00, 1169.30, 1172.00, 1174.50 with the targets at 1157.00, 1152.00, 1150.00 and stop-loss at 1175.00.