As a safe haven asset, gold prices continued their gains for the third week to the highest level in four as the week kicked off with a contraction in US services PMI (and European manufacturing PMI), followed by a hike in Fed interest rates signaling concerns about a recession from Chairman Powell, and the issue of the latest tensions between the US and China.
The upward movement of gold prices yesterday was driven by the decline in US Treasury yields. The 10-year yield is now 2.68%down from the week’s high seen on Wednesday of 2.84%. Meanwhile, the Bank of England’s (BoE) interest rate hike yesterday sent a direct signal that the UK may enter a recession in the fourth quarter of this year, with October inflation forecasts of 13.3% (last to 9.4% in June).
A strong move closer to yesterday’s $1800.00 level has now resulted in a price retracement with a bullish flag continuation pattern. If the price manages to break through yesterday’s high zone at $1795.00the next major resistance will be at the psychological $1800.00 figure near the 61.8% Fibo level in the day timeframe, and the next resistance will be at the high zone seen at the beginning of July at $1812.00. There will be support at $1786.00 and $1773.00.
It is inevitable that today’s US non-farm payroll (NFP) report for July will distort the technical view. NFP is expected to increase by 250kless than the previous month’s 372k. The unemployment rate is expected to remain stable at 3.6%a figure seen since March.
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