Gold: A Major Support Holds Firm Again
Andrew Lane | Jul 22, 2022 02:36AM ET
The $1680 Level has long been significant when measuring gold on the charts. Since hitting the highs of $2080 in August 2020, gold has fooled us all with fake breakouts, both low and high. It's been directionless within a range of $1680 – $2080.
Gold has touched this lower end for the fourth time, and the support still holds. The daily chart below also shows where the cluster formed and the level acted as support and resistance post-COVID.
It was tested twice in March 2021, then again in August 2021 in the early hours of trading when thousands of contracts were dumped in thin liquidity and miraculously bought back shortly after, and then again yesterday. Gold hit that level and reversed magnificently as the yields tanked and the EUR/USD revered upon the ECB’s interest rate decision. While another attack lower can't be ruled out, this major level looks firm.
When we consider this daily chart below and price action, movement dictates that directional changes occur when tops and bottoms are made and price reverses. The fundamentals of gold are still there and haven’t changed. Higher interest rates still don’t appear to have caused that much money to have rotated from stocks to gold. History dictates that in these macro environments, it does eventually.
There should be one more hurdle: The Fed when they reverse course and stop raising rates. This will lead to more currency debasement, and gold and silver will take off. With the yield curve having unequivocally inverted, the United States 2-Year note is now racing ahead of the 10-year, this is an indication that recession is right around the corner.
Gold has frustrated the life out of the bulls. Stagflation has been on the cards for some time. Data will soon confirm this, and gold bulls will be rewarded.
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