The US dollar bullish trend continues unabated. After briefly giving up some gains last week ahead of the September NFP report in the United States, the greenback is back at its highs.
Gold trades in tandem with the US dollar. A stronger dollar leads to rising yields for the US Treasury bonds, which, in turn, leads to a lower price of gold.
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But these dynamics triggered similar reactions in all markets. In other words, it appears like everyone trades one single market.
For example, currency traders are on the lookout for the next US dollar move. But so are bond, gold, or equity traders, because the dynamics in the currency, commodity, and equity markets depend on the US dollar’s direction.
Gold price finds major support below $1,700
The investing community was disappointed by gold price’s performance during the COVID-19 pandemic and the inflationary times that followed. After all, gold’s role in a portfolio is to protect it against inflation, which it did not.
Not only that the price of gold did not rise, but it declined while inflation climbed higher and higher. In other words, gold accelerated the depreciation of the portfolio instead of acting as a safe haven.
However, gold is known for leading financial markets. Therefore, the technical picture may look concerning for gold perma bulls, but there is scope for building a bullish case for the price of gold.
More precisely, gold has found a strong support level just below $1,700. Many gold bulls are concerned that the market has formed a double top pattern with the two spikes above $2,000.
However, the fact that it hesitates at the so-called neckline, shown above in black, reflects the gold price’s resilience to drop further. For bulls, this might be the first sign of an upcoming bullish trend.
So what needs to happen next for the bulls to jump on a long trade? Two things are essential for gold bulls.
First, the support area must hold. As such, the price needs to climb back above $1,700.
Second, the gold price must break the series of lower lows and lower highs that started from the second attempt above the 2,000 level. If that happens, the chances are slim that the market has formed a double top pattern.
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