Gold price momentum accelerates as the US dollar slumps
The euro resumed the upward trend against the US dollar as investors reacted to the upbeat economic numbers from Europe. According to IHS Markit, the services PMI rose to 54.7 in July as countries in the bloc continued to reopen. The number was slightly lower than the 55.1 that analysts were expecting. It was also higher than in the previous 48.3. In the same month, the composite PMI rose to 54.9 from the previous 48.5. Meanwhile, retail sales in the region rose by 1.3% in June after falling by 3.1% in the previous month.
Yesterday, gold crossed the important milestone of $2,000 for the first time on record. This increase brought its year-to-date gains to more than 32%. There are several reasons why gold. First, analysts from top institutions have upgraded their calls for the metal. For example, on Monday, analysts at Goldman Sachs raised their target to $2,300 while those at RBC increased their target to $2,500. Second, the real yield in the US has continued to decline because of the Fed easing policies. Third, the demand for gold from institutional investors has increased.
The British pound increased against the US dollar as investors reacted to strong PMI numbers from the UK. According to Markit, the services PMI increased to 56.5 in July from the previous 47.1. This number was less than the 56.6 that analysts polled by Reuters were expecting. In the same month, the composite PMI increased to 57.0 from the previous 47.7. These numbers, coupled with the manufacturing PMI data released on Monday, show that the UK economy is recovering well. Meanwhile, data from ADP showed that private employers employed just 157K people in July, a sharp contrast from the 167K that analysts were expecting.
The EUR/USD recovery continued today after the services PMI and retail sales data from Europe. The pair is trading at 1.1850, which is a few pips above this week’s low. On the four-hour chart, the price is above the short and medium-term moving averages while the RSI has climbed to the current level of 60. The pair is likely to continue moving in an upward trend as bulls target the next resistance at 1.1900.
Silver price jumped to an intraday high of 26.90, which is its highest level in years. On the daily chart, the price is above all the short, medium, and longer-term moving averages. Similarly, the RSI and MACD have jumped to multi-year highs. This trend means that bulls are now in total control. As such, the pair may continue rallying as bulls approach the next target at 28.00.
The XAU/USD pair rose to an intraday high of 2044, which is its highest level on record. The four-hour chart shows that the current upswing happened a few days after the price formed an ascending wedge pattern. Like the XAG/USD, the pair is above the 50-day and 100-day EMA while the RSI has continued to rise. The price is also along the upper line of the Bollinger Bands. Therefore, the pair will likely continue to rise as bulls target the next resistance at 2100.