S&P 500 gains to extend record run, set for positive week
After reviewing the movements of the gold futures in different time patterns, I anticipate that U.S.-Japan trade deal this Wednesday has raised optimism over a potential U.S.-EU trade deal has not only lifted U.S. Stocks and Treasury yields but also resulted in a selling spree in gold futures to slide from a five-week high as risk-on sentiment lured investors away from the safe-haven metal.
Undoubtedly, this surge in optimism over a potential U.S.-EU trade deal is keenly watched for its next directional move in markets.
However, if the talks fail, the currently prevailing sentiments over the upcoming trade deals could once again heighten uncertainty, as the European Union prepares to unveil retaliatory measures if the United States doesn’t move forward on a similar trade deal that would impose 15% tariffs on European imports, while waiving duties on some items.
I anticipate that either more trade agreements will be announced before the August 1 deadline or postponements will be granted.
Undoubtedly, this trade optimism fueled risk-on sentiment as the yield on benchmark U.S. 10-year notes rose 5.2 basis points to 4.338%, from 4.336% late on Tuesday, while the 30-year bond yield rose 4.1 basis points to 4.944% from 4.903% late on Tuesday, indicating that the storm clouds parting and the macro situation looks to be improving.
Undoubtedly, such a scenario is likely to trigger a selling spree in gold futures as the technical formations look in favor of the bears to remain in command till they push them to $2970 before the August 1 deadline.
Technical Levels to Watch
In a weekly chart, gold futures are trying to hold the immediate support at the 9 DMA at $3354 despite the formation of an exhaustive hammer, which indicates a breakdown below this support could push the gold futures to test the next support at the 20 DMA at $3271.
In a daily chart, gold futures are trying to hold the immediate support at the 9 DMA at $3376, where a breakdown could push the futures to test the next supports at the 20 DMA at $3352 and 50 DMA at $3353.
Undoubtedly, if the gold futures find a sustainable move below these supports, selling pressure could push the futures to test the next significant support at the 100 DMA at $3260 before the August 1 deadline.
In a 1-Hr. Chart, gold futures are trading even below the 9 DMA at $3390, after the formation of two bearish crossovers, formed with piercing of 50 DMA by the 9 DMA and 20 DMA while the 9 DMA has also pierced the 100 DMA too and about to pierce 200 DMA at $3374 that will likely to keep the futures in bearish mode till this weekly closing.
Disclaimer: Readers are advised to take any position in gold futures at their own risk, as this analysis is only based on observations.