Talking Points:

- Gold technical strategy: Long-term mixed, Intermediate-term bearish, short-term bearish.

- IG Client Sentiment is currently showing +3.63 traders long for every one short, and given retail sentiments contrarian nature, this is bearish.

- If you’re looking for trading ideas, check out our Trading Guides. If you’re looking for shorter-term ideas, check out our IG Client Sentiment.

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In our last article, we looked at the continued down-trend in Gold prices after last Monday’s bearish breakout. And just like last Monday, this week has opened with another fresh Seven-week low showing in Gold, and just as we advised last Monday – traders will likely want to avoid chasing the move and, instead, let prices work back towards resistance so that risk can be more properly appropriated.

One significant reason for caution is the fact that the U.S. Dollar is likely going to be on the move this week. Tomorrow is Independence Day in the United States, and traders return on Wednesday to the release of FOMC meeting minutes from the bank’s rate decision in June followed by Non-Farm Payrolls on Friday. And given the pronounced down-trend that’s been seen in the Greenback of late, with fresh 10-month lows printing on Friday just ahead of the close of Q2 – there will likely be considerable focus on these drivers as traders attempt to read the tea leaves around what the Fed might be doing in the second half of the year.

This is relevant for Gold prices given the fact that the continued sell-off in the Dollar has failed to inspire any lasting strength in Gold: While the U.S. Dollar drove down to 10-month lows, Gold prices continued to sell-off to fresh seven-week lows, and this speaks to the rising inflation expectations being seen globally after last week’s comments from Fed Chair Janet Yellen and ECB President, Mario Draghi. This can keep Gold prices moving-lower even, with USD-weakness, and traders can continue to move-forward with a down-side bias for Gold prices.

The matter of entry is a bit more of a challenge given that we’re sitting very near the lows, but as we looked at last Monday when Gold prices had run-lower, we can incorporate prior support swings to help in seeking out ‘lower-high’ resistance for bearish continuation approaches. On the chart below, we look at four such areas, two of which were included as part of our strategy in last Monday’s article, and can certainly be re-used and incorporated for bearish continuation approaches.

Gold Hourly Chart with Potential Resistance Levels Applied

Gold Prices Sink to Seven Week Low as Big Week for the Buck Begins

Chart prepared by James Stanley

--- Written by James Stanley, Strategist for DailyFX.com

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