Can gold keep above $1800?
Gold is still nursing deep wounds inflicted by the Fed’s hawkish tilt last month.
After shedding over 7% in June, it has gained roughly 2% month to date.
Over the past few days, gold has been supported by falling Treasury yields, fears around the Covid-19 variants, and easing concerns over the Fed raising interest rates sooner than expected. Although such themes continue to sweeten appetite towards the precious metal, the question remains for how long?
Gold is trading marginally above the psychological $1800 level as writing and is likely to be influenced by the latest FOMC minutes on Wednesday. The minutes could provide clues about the central bank’s hawkish shift at its June meeting while offering some clarity on any discussions about the tapering timeline. It may even give an idea on how serious the Fed is about making a move.
If the minutes echo the hawkish tone seen in June’s policy meeting, this is likely to drag gold prices lower. However, should the minutes come across as dovish despite the hawkish ‘dot plot’, gold bugs may be injected with a renewed sense of confidence to push prices well beyond $1800.
In the meantime, prices are pushing higher on the daily charts with gold back above its 100-day simple moving average (SMA). The breakout above the $1794 resistance level earlier this week opened the doors for bulls to challenge $1800. A strong daily close above $1800 could signal a move towards $1825. Bulls may face some resistance beyond $1825 given how the 50-day and 200-day SMA reside above this region. However, if gold bugs can overcome this obstacle to conquer $1842, the next key levels of interest can be found at $1870 and $1900.
Alternatively, if gold is unable to keep above $1800, a decline towards $1794 will most likely be on the cards. Below this level opens a path towards $1760 and $1735, respectively.