Gold Price Surge Higher As Dollar Index Breaks Critical Low
Dwayne Buzzell | Jun 06, 2017 04:50PM ET
Trading the financial instrument has become pretty complex nowadays as most of the investors don't have any clear clue regarding the next step of the leading economic countries. The price of gold is measured in dollar hence a slight variation in the U.S dollar index significantly affect the gold market. From the very beginning of the year 2017, the U.S economy is under the extreme level of bearish pressure due to ongoing weak performance. Though the green bucks are trading lower against the most of its major rivals still it's holding the ground as FED chairperson Janet Yellen stated for project three rate hike in the year 2017.
The green bucks gained a decent buying pressure in the global market after the first interest rate hike in the year 2017 but most of its bullish momentum was absorbed by the market due to the ongoing weak data release from the U.S economy. The professional gold investors made a decent profit by buying the gold at dips and currently most of them have already booked their profit as the price of gold is heading towards the critical resistance level at 1299.22.This level is going to provide a significant amount of selling pressure and the expert investors will be waiting for bearish price action confirmation signal to short the gold in the global market.
Let’s do the technical analysis of gold market
Figure: Technical analysis of gold market
From the above figure, you can clearly see that the price of gold has surged through the bearish trend line resistance at 1279.51 and currently testing the high of 16th April 2017 at 1295.55.Most of the professional gold investors in the exchange traded funds community has already booked their profit in the market as there are plenty of resistance ahead on the daily charts. The professional are now currently eyeing on the 1302.00 level since this level is most likely to cap the recent bullish movement of the gold price. If the critical resistance level at 1302.00 manages to limit the upward momentum of the gold price then the first bearish target would the nearest critical support level at 1214.00.From this level, we might see a decent bullish bounce but ultimately the pair will head towards the major support level at 1121.00.However, if a daily closing above the critical resistance level at 1302.00 will ultimately push the pair higher establishing the medium term bullish trend in the market.
Get The News You Want
Fundamental factors
Fundamentally the recent performance of the green bucks is not up to the market and for this very reason the price of gold is skyrocketing. Most importantly the U.S dollar index has breached the critical support level at 96.70 level and this has significantly weakened the U.S dollar in the global market. The next stop for the U.S dollar index is at 95.95 which is also the low of 9th November 2016.This level is going to provide a significant amount of buying pressure to the U.S dollar index and bullish recovery attempt will push the price of gold lower in the global market. On the contrary, if FED chairperson Janet Yellen comes up with a hawkish hike in the June FOMC meeting then we will see a strong bullish rally in the green bucks in near future.
Summary: The price of gold is now trading at a critical resistance level and most of the leading investors have already booked their profit in the market. The recent performance of the U.S economy is not up to the market yet the optimistic dollar bulls are cautiously waiting for the June FOMC meeting minute for the interest rate hike decision. An imminent rate hike in the month of June will boost up the sellers in the gold market. Considering all the parameters it’s better to stay on the sideline until the market offers more lucrative trading opportunity.
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.