Gold Under Pressure Amid Firm Dollar, U.S. Debt Ceiling Deal

Early in the day, gold found support at 1,414 and recovered ground to trade around 1,425, but it is still negative.
Mauricio Carrillo
Gold Under Pressure Amid Firm Dollar, U.S. Debt Ceiling Deal
Gold Under Pressure Amid Firm Dollar, U.S. Debt Ceiling Deal

Gold and other metals are trading under pressure on Tuesday as investors are digesting a firm dollar and the deal on the U.S. debt ceiling.

On Tuesday, the U.S. Dollar Index rallied to trade at 97.60, its highest level in two weeks, as traders welcomed the debt limit deal.

President Trump and U.S. congressional leaders reached an agreement for the approval of a 2-year extension of the debt limit and federal spending to avoid a government default in 2019. The deal will add more deficit in the United States.

Besides, weak euro and British pound are pushing the dollar even higher, while adding pressure to gold and other metals.

On other news, Boris Johnson will be the next Prime Minister in the United Kingdom after winning the Conservative Party leadership race.

Gold down for the third day

XAUUSD daily chart July 23

Gold is trading down for the third straight day on Tuesday as the dollar, and risk appetite is pushing pressure to the metal. However, XAU/USD is recovering ground right now.

Early in the day, gold found support at 1,414 and recovered ground to trade around 1,425, but it is still negative.

As F.X. Empire analyst James Hyerczyk affirmed in a recent report, “the intraday trend in gold is down and likely to remain under pressure if the U.S. Dollar and Treasury yields continue to rise. Additionally, increased demand for risky assets will also weigh on gold prices.”

Currently, XAU/USD is trading 0.12% down on Tuesday at 1,422. Technical conditions suggest more room for the downside with the next support at the 20-day moving average at 1,413. Below there, 1,400, 1,390, and 1,380 are the levels to watch.

On the other hand, a recovery in the euro and pound would send the dollar index lower, helping gold to move higher. To the upside, resistances are at 1,430, 1,440 and 1,450.

Silver extends advance after a brief setback

XAGUSD daily chart July 23

Silver is trading positive on Tuesday after recovering from early losses that sent the unit to trade as low as 16.20. It is now testing the 16.50 area.

The recent pullback proved the 16.20 as firm support following two tests in the last two days. However, 16.00 is the level to watch.

Silver is trading positive for the seventh day in the last eight. Since July 12 lows at 15.05, XAG/USD rallied around 9.3% to current prices.

Currently, XAG/USD is trading 0.40% positive on the day at 16.42, as the unit is testing the 16.50 area, which is giving a bit of resistance ahead of the 13-month hight at 16.60 performed on July 19.

“Beyond that, we also have been a bit parabolic so I think we needed to pull back a bit longer, or perhaps even consolidate just above the $16.00 level to attract fresh money,” Christopher Lewis, FX Empire analyst said in a recent article.

“Remember, there are large amounts of traders out there who look at the markets through the prism of value, so they are a bit cautious of “paying up” for any type of commodity or asset,” Lewis highlights.

Technical indicators suggest more room for the upside in silver, with the 16.50 as immediate resistance. Above there, multi-month high at 16.60 is the frontier. To the downside, 16.20 is the short term support, followed by the 16.00 area and then, the 15.60 level.

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