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July 6, 2021

Gold Leaps Higher Despite Dollar Strength

Frank Cabibi

7/6/2021

After coming out of the worst month in roughly 5 years, gold's price jumped as much as 1.4% on the day amid a higher US dollar index before retracing to the low $1790s. Retail sentiment is mixed overall as COT shows a decrease in long positions and an increase in short positions from institutional investors. This month is already showing positive traction despite the overall strength seen in dollar speculation of raising interest rates.

Our outlook

Big money started upping their short positions again for the past month and some days all the while gold's price has tumbled from the highs of $1917. Longer term, this metal looks less attractive when compared to the USD, and until sentiment changes back to a weaker dollar, this pair might continue to fall. However, there look to be some bullish plays in the short term.

Trade Setups

XAUUSD

Here is a look at gold from the 1H timeframe. After testing some heavy resistance, it retraced down to the low $1790s and caught support around $1792-3 range. The last 1H candle left a long wick suggesting another move up, and the trend since July started looks like a clean staircase to the upside.

A problem I'm seeing, however, is on the 1D chart where we have seen gold test resistance and retrace hard. The shorter timeframes do look more bullish, but the overall trend might not be able to continue upward. In fact, if this daily candle ends with big rejection like how we see it now, gold might be in for another leg down.

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