8/2/2021

The price of the gold bullion fell a little over 1% last Friday amid a red stock market day in the US as big earnings were released. A big question for the average is investor is whether to be bullish on gold or the US dollar. The Fed has announced that they will keep interest rates from going negative and that they will keep boosting the economy while it recovers. But is that good or bad for the strength of the USD/gold?

Our outlook

In the Fed's FOMC conference and Q&A last Wednesday, Jerome Powell made it clear that they are a long way from tapering of any kind. That means more asset purchases and more money printing without slowing. The combination of low interest rates and the indefinite increase of supply is a great sign for the gold bulls. Quadriga Igneo fund manager, Diego Parrilla called the tapering process "glacial" as in that when the Fed does start to taper, it will be very subtle each time, which will take a long time for the Fed to slowly remove the fiscal columns currently supporting the US economy, according to a Bloomberg article. With these factors in mind, I do think gold has a likely chance of recovering from the $1,800s, and I could definitely see a push to the $1,900 in the second half of this year.

Trade Setups

XAUUSD

Gold bounced off a rising trend line on the 4H and daily chart with a big rejection from the lows on the most recent 1D candle. I think price could try to test the $1830s at some point this week if this candle can remain looking this bullish. Price is currently up 1.91% from the time of the golden cross back on June 25.

Gold on the 4H chart has resistance around $1,822 and support on the rising trend line should price dip, but a second test at this low won't look good without taking a shot at the $1,830 mark before then at least. In other words, gold will have to break above the $1,820s to look more bullish from a technical standpoint.