On Monday, the yellow metal gold prices continued to extend its recent rally, surging above the $1,400 level. It’s mostly due to possibilities for more relaxed monetary policies from the Federal Reserve, and other Central Bank increased inflows into the gold.

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Gold futures for August delivery is trading at $1,406, adding around 0.51% for the day. One of the reasons behind the surge in gold prices is the dovish FOMC. The Federal Reserve revealed the probability of interest rate cut, possibly as soon as next month, to offset for the consequences of slowing global growth, which is the result of trade tensions and subdued inflation.

Lower interest rates make safe-haven securities such as gold, which does not yield interest, more attractive to investors. Thus the demand for gold surge, especially when the U.S. dollar is also weakening over lower interest rates. As you know, increasing geopolitical tensions in the Middle East also increased safe-haven demand for gold.

Gold – Technical Analysis

The precious metal gold has not only violated the bearish butterfly pattern at $1,365 but also has broken a $1,400 psychological resistance level. For now, gold prices are testing the underside of rising support-turned-resistance at the set from December 2016, now at 1414.21.

 

R3: 1444.29
R2: 1420.25
R1: 1409.87
Key Trading Level: 1396.2
S1: 1385.83
S2: 1372.16
S3: 1348.11

The bullish breakout can extend buying until the August 2013 high at $1,433.85. Alternatively, a move back below support at 1392.08 opens the door for a challenge of 1375.15. All the best!

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