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Forex | Precious Metals Outlook XAUUSD/XAGUSD For June 30th - July 7th 2024

As we approach the first week of July 2024, the Forex market presents intriguing opportunities in the precious metals sector, specifically XAUUSD (gold against the U.S. dollar) and XAGUSD (silver against the U.S. dollar). This analysis will cover the key factors influencing these trading pairs, providing an outlook for the week ahead.

Forex comes with substantial risk; consult your financial advisor/mentor before trading. I do not give financial advice; this post is strictly for educational and information purposes. 

Fundamental Analysis



Economic Indicators and Events

  • Inflation Data: A series of upcoming economic reports and Congressional testimony from Federal Reserve Chairman Jerome Powell could jolt U.S. government bonds out of a narrow trading range, directly influencing the prices of gold and silver. Yields on benchmark U.S. 10-year Treasuries, which move inversely to bond prices, have been range-bound between 4.20% and 4.35% as the market digested data showing slowing inflation and signs of cooling economic growth in some indicators. The 10-year yield stood at 4.33% on Friday (Randall, 2024).

  • Central Bank Policies: Central bank policies, such as interest rate decisions, significantly impact the prices of gold and silver (Snow, 2024). Lower interest rates, often implemented to combat inflation, make non-yielding assets like gold and silver more attractive, leading to increased demand and higher prices. The recent admission by Australian Treasurer Jim Chalmers about inflation challenges and potential rate hikes underscores the delicate balance central banks must maintain. As central banks navigate these economic conditions, their policies will continue to drive the market dynamics of XAUUSD and XAGUSD (Williamson, 2024).
  • Geopolitical Tensions:  Business Insider highlights how geopolitical tensions, such as the strategic shifts by China to increase its gold reserves while reducing U.S. Treasury holdings, are expected to drive gold prices higher. These actions indicate a move to diversify away from the U.S. dollar, which can increase demand for gold as a safe-haven asset. The combination of geopolitical maneuvers and anticipated Federal Reserve rate cuts supports Bank of America's forecast that gold prices could reach $3,000 per ounce (Cingara, 2024).

Gold prices rose on Monday due to a weakening dollar, with investors keenly awaiting U.S. inflation data that could impact Federal Reserve policies. Spot gold increased by 0.5% to $2,332.62 per ounce, while U.S. gold futures settled 0.6% higher at $2,344.40. The dollar's decline made gold more attractive to holders of other currencies.

This key inflation measure might influence the timing of potential rate cuts by the Federal Reserve. Additionally, ongoing speculation about Fed rate cuts, with traders pricing in a 66% chance of a cut in September, has buoyed gold's prospects, with Bank of America predicting gold could reach $3,000 per ounce in the next 12-18 months if non-commercial demand increases and central bank policies shift favorably (Patel, 2024).

Supply and Demand Dynamics

  • Gold (XAUUSD): The supply of gold remains tight, and the mining output is stable. Demand is driven by both investment purposes and industrial uses.
  • Silver (XAGUSD): Silver continues to benefit from strong industrial demand, particularly in the electronics and renewable energy sectors. This dual demand often leads to higher volatility compared to gold.

Technical Analysis


Price Charts and Patterns

If you are new to Forex, I recommend getting some practice time in with a demo account; I will be on a demo account until I'm ready to move forward on a live account (not financial advice). 

  • XAUUSD Analysis: The gold market has formed a bullish pattern, with support levels at $1,800 and resistance at $2,347. The 50-day and 200-day moving averages are critical to watch, suggesting a potential upward momentum. On the 15-minute chart, I'm looking for a pullback and a higher swing low to enter for a short-term trade. Take profit (Green line) at 2345.16 and stop loss (Red line) at 2309.00.
I move my stop loss to break even(B.E.) once the price has moved in my favor. If I'm losing the position, I just take the loss and keep moving forward. The key is profitability over time and controlling emotional trading. 



XAGUSD Analysis: Silver shows a consolidation pattern between $22.50 and $25.00(Daily Chart). I'm seeking confirmation of support at 26,70 to place a buy position, take profit (green line) at 29.00, stop loss at 24.45, and look for support at 25.457. 

We'll return to this post and see how well my prediction goes. The technicals are there for buy trades only with the precious metals markets. 

Technical Indicators

  • Moving Averages: For both XAUUSD and XAGUSD, the 25-day, 50-day, 100-day, and 200-day moving averages are critical trend direction indicators. A crossover between these averages could indicate a change in trend.
  • Relative Strength Index (RSI): Currently, the RSI for XAUUSD is approaching overbought territory, while XAGUSD is neutral. Traders should monitor these levels for potential reversal signals.
  • Bollinger Bands: The bands for both metals are tightening, suggesting a potential breakout. Traders should be prepared for increased volatility.

Weekly Forecast



Gold (XAUUSD)

  • Support Levels: $1,800, $2285.17
  • Resistance Levels: $2,430, $2,400.00
  • Outlook: Bullish sentiment prevails if gold remains above the $2,290 support level. A break above $2,348 could lead to a test of $2,360.

Silver (XAGUSD)

  • Support Levels: $22.89, $24.325
  • Resistance Levels: $27.729, $29.793
  • Outlook: Silver is poised to continue moving up. A sustained move above $26.700 could propel prices toward $30.00 long term. Traders should watch for volume and momentum indicators confirmation or a W pattern with a higher swing low. 

The outlook for XAUUSD and XAGUSD on June 30 and July 7, 2024, appears promising, with several bullish indicators. However, traders should remain vigilant of economic data releases and geopolitical developments that could impact market sentiment. I await confirmation of the move-up on gold/silver pairs and look for W or M patterns on the lower time frames (M30/M15/M5). Utilizing a combination of fundamental and technical analysis will be vital to navigating the Forex market successfully this week. Only trade with what you can afford to lose and develop a plan that works for you. 

 

References


Cingari, P. (2024, June 24). Bank of America says that gold prices are set to climb to $3,000 on Fed rate cuts and geopolitical tensions. markets.businessinsider.com.                                                                    https://markets.businessinsider.com/news/etf/gold-prices-set-to-climb-to-3-000-on-fed-rate-cuts-geopolitical-tensions-bank-of-america-says-1033500026Journal of Economic Studies, 34(2), 123-137.

          Patel, B. (2024, June 24). Gold gains on dollar retreat; focus now on U.S. inflation data. Reuters. https://www.reuters.com/markets/commodities/gold-edges-higher-softer-yields-us-inflation-data-focus-2024-06-24/


Randall, D. (20June 30e 30). Jobs and inflation data may break the U.S. Treasury market out of its narrow range. Reuters. https://www.reuters.com/article/us-usa-markets-bonds-idUSKBN2DF0QO

          Snow, R. (2024, May 9). How central banks impact the forex market. DailyFX. https://www.dailyfx.com/education/forex-fundamental-analysis/how-central-banks-impact-forex.html


          Williamson, J. (2024, June 29). Jim Chalmers makes blunt admission about inflation - as fears mount over another interest rate rise. Mail Online. https://www.dailymail.co.uk/news/article-13584049/Jim-Chalmers-inflation-rate-RBA.html


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