Gold prices ended July on a cautious note as persistent U.S. dollar strength continued to weigh on the precious metals market. After a steep weekly decline of 4.59%, gold futures regained slight ground, rising by $16.40 (0.49%) to settle at $3,344.30. Despite touching an intraday high of $3,366.70, spot gold also saw resistance and closed at $3,291.70.
Technical Outlook: Spot vs. Futures Divergence Raises Concern
A growing divergence between spot and futures gold prices is sparking concern among traders. While spot gold remains supported near its 100-day Simple Moving Average (SMA), futures are trading well below this level — a sign that longer-term institutional sentiment may not align with short-term bullish activity.
Historically, when futures lag behind spot prices, it reflects investor caution and signals that gold’s recent recovery may be masking deeper structural weaknesses in the market.
Doji Candles and Price Stagnation: A Warning Sign?
Despite several record-breaking intraday highs, gold futures have declined approximately 1.21% since April — a move best described as sideways. The formation of three consecutive monthly doji candlesticks further illustrates indecision in the market, with prices closing close to where they opened each month.
This pattern, combined with extended upper wicks on each candle, suggests consistent rejection from higher levels, pointing toward distribution at elevated prices — a possible sign of a near-term top.
Silver’s Outperformance Falters at Key Resistance
Silver offered a contrasting story for most of Q2, rising 10.98% since April’s close. However, momentum faded in the final days of July. Silver futures dropped by $0.36 (0.98%) to close at $36.81, with a notable 3.15% drop earlier in the week breaching key support at $37.70 — a level not broken in over a decade.
Still, silver remains fundamentally bullish, especially if global trade talks continue progressing positively. Unlike gold, silver could benefit from both industrial demand and safe-haven flows.
Fed Decision Triggers Surprising Selloff
The U.S. Federal Reserve kept interest rates unchanged during its July FOMC meeting, as expected. However, the announcement unexpectedly triggered sharp selloffs in both gold and silver. This reaction puzzled analysts, given the absence of any significant policy shift or surprise.
The overreaction may reflect market sensitivity to any Fed commentary, with traders likely bracing for upcoming shifts in monetary policy rather than reacting to the July status quo.
U.S. Dollar Rally Dominates the Precious Metals Landscape
The most notable factor driving gold and silver weakness has been the resurgence of the U.S. dollar. The dollar index rose for six consecutive sessions, breaking above the key 100 level and closing July with a 3.39% gain — ending a six-month losing streak.
This strength creates a significant headwind for precious metals, making them more expensive for global investors and potentially reducing demand. Unless the dollar trend cools, gold and silver could remain under pressure.
📌 Key Takeaways for Traders at www.DailyForex.pk:
- Gold remains vulnerable below key technical levels, despite short-term rebounds.
- Silver shows relative strength, but faces challenges near $37.70 resistance.
- Dollar strength and market overreactions to Fed policy are driving volatility.
- Watch for upcoming U.S. inflation data and Fed commentary for next moves.
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